Npower announces gas price cut and takes a swipe at Labour

http://www.theguardian.com/money/2015/jan/23/npower-announces-gas-price-cut-energy-bills

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Npower has become the fourth major energy supplier to announce a cut in gas prices but its chief executive suggested it might have gone further were it not for the threat of a price freeze by the Labour party.

Npower, which is part of German utility company RWE, will make a 5.1% reduction on its standard gas tariff from 16 February, which it said will benefit 1.3 million customers to the tune of an average £35 over the next year.

But in a Q&A to accompany the news of the price cut Paul Massara, CEO of RWE npower, addressed the question of whether the reduction would have been bigger if Labour hadn’t announced their intention to freeze energy prices if they won the election.

“Political factors have become increasingly significant when calculating changes to prices,” he said. “Any change in prices in the short term will inevitably have to take account of potential outcomes after May this year.”

Npower is following E.ON, British Gas and Scottish Power, which over the past seven days have all announced immediate or planned gas price cuts of between 3.5% and 5%.

On Wednesday smaller supplier Ecotricity announced it had reduced the price of gas for all its customers by 6.1%, providing the biggest recent cut in the industry.

Joe Malinwoski, founder of price comparison website theenergyshop.com, said the cuts the big suppliers have made represent about 20% to 25% of the cost reduction energy suppliers will see when falling wholesale prices are fully reflected in their input costs.

“It is now clear that customers will be offered no more that small fraction of the potential savings that suppliers will eventually realise as a result of falling wholesale prices,” he said.

Meanwhile, Gillian Guy, chief executive of the charity Citizens Advice branded the spate of recent cuts to gas prices a “phony price war”, accusing the companies of holding back savings of as much as £240 per customer.

She said customers of all these companies could be better off if they were simply switched to the suppliers’ cheapest tariffs.

“Token energy price cuts to standard tariffs do not reflect the big savings that energy firms can pass on to households,” she said. “Npower customers could save as much as £240 by switching to their cheapest available tariff but they are cutting prices by a fraction of this.

“Energy suppliers must pass on savings to all their customers, not just those able to switch to get the best deals.”

The price of the cheapest tariffs, which are all fixed price tariffs, have fallen by £36 in the last month alone, or £123 since January 2014, according to analysis by theeneergyshop.com.

Energy regulator Ofgem also accused the companies of making cuts that benefited only the most savvy energy users.

“We are seeing companies compete for consumers interested in taking a fixed-price deal. However, we are not seeing rigorous competition between suppliers that benefits all consumers,” said Ofgem CEO Dermot Nolan.

“Around 60% of customers are on variable tariffs, and the lack of competitive pressure on prices for these customers is another reason why the Competition and Markets Authority is investigating this market.”

Npower’s price cut may go some way towards appeasing its customers after research from Which? on Thursday put the energy giant at the bottom of the pile for complaint handling and customer service. It achieved the lowest score for the fourth year running with a customer satisfaction rating of 35%.

Scottish Power achieved a slightly higher score (41%), below EDF Energy (49%), British Gas (49%), E.ON (50%) and SSE (50%).

The smaller, independent suppliers outranked the bigger names by a long way. Consumers ranked Ecotricity the best supplier with a score of 84%, closely followed by Good Energy (82%), Ebico (81%), Ovo Energy (80%), Utility Warehouse (76%) and Flow Energy (73%).