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Energy price cuts need to be bigger and take effect now says Citizens Advice

Households are losing an estimated £47 million in total because cuts to energy bills are delayed by up to three months.

New analysis from Citizens Advice highlights how small and delayed price reductions made by the largest energy suppliers in the last few weeks will do little to help people afford to heat their homes over the winter months.

Today, Wednesday 11th February, EDF’s 1.3% price cut comes into force.

E.ON is the only large supplier whose cut took immediate effect meanings its customers already are feeling the benefit.  SSE customers have to wait three months before they get any savings as its reduction only starts on 30 April 2015.

As the temperatures drop Citizens Advice is calling on suppliers to take urgent action to help people afford bills by:

1. Making further cuts to prices to fully reflect the savings from reductions in wholesale costs.
2. Bringing in price cuts straight away.
3. Offering prepayment customers a debt holiday.

Prepayment customers are charged an extra £80 a year, on average, for their gas and electricity.  The outdated top up system means people can only add money to their meter by going to a local shop – a task made more difficult by treacherous weather.

The table below reveals the amount each supplier has cut their prices by, when the cut comes in effect, savings each customer misses out on and the total amount lost by all of customers from each supplier.

The total lost by customers is a calculated using an estimate of the number of standard tariff customers eligible for the cuts announced. This is based on industry commentary that up to 40pc of customers on fixed price/term tariffs.

Last month Ofgem’s supply market indicators estimated energy firms’ profits may increase to £114, up £9 from November 2014 and £37 year on year.  Yet some bills will only go down as little as £9.

Citizens Advice Chief Executive Gillian Guy said:

“The latest price cuts are an empty gesture by most suppliers.  If energy companies really wanted to pass on savings to their customers they should have reduced prices further and immediately not leave households struggling over the coldest weeks. E.ON did cut bills straight away and others firms should do the same.

“The recent cold snap means people are spending much more on heating their homes now than at any other time of the year.  With suppliers expected to make bigger profits this year prices need to come down further and prepay customers should be offered a debt holiday.

“The Competition and Market Authority needs to take a close look at how firms have cut prices this winter and assess whether the industry is behaving competitively and offering people a good deal.  The industry’s approach to the latest price reductions suggests firms take their customers for granted and don’t understand how difficult it is for some people to afford to have a warm home.”  

Last month Citizens Advice revealed there is as much as a £200 difference between the cheapest deals currently offered by suppliers and their standard tariffs.

The differences between the cheapest and standard variable dual fuel tariffs for each of the Big Six energy firms from 20 Jan:

Citizens Advice is urging customers to call up their supplier and make sure they are on the cheapest deal available.

With prepayment meters often installed to recoup debts, a proportion of each top-up goes towards paying off arrears.  Delaying debt repayments until the weather warms up could prevent significant numbers of prepayment customers from rationing heat and hot water or cutting off their supply altogether.  

As part of its Fair Play for Prepay campaign Citizens Advice is calling on suppliers to offer prepay customer easier ways to top up their meter including online and over the phone.

Citizens Advice

Notes to editors:

1. The ‘total lost by customers’ is based on Ofgem’s statement on 23 January 2015 that approximately 60 per cent of the customers of SSE, Scottish Power, npower, EDF and E.ON will receive the cuts announced in January 2015 (the remaining 40 per cent assumed to be on fixed term deals).  The total lost by British Gas customers is based on its statement that 6.8 million of its customers will receive the cut it announced on 19 January 2015.
2. To contact the Citizens Advice news team call the press office on 03000 231 080, or via email at press.office@citizensadvice.org.uk.
3. The Citizens Advice service comprises a network of local bureaux, all of which are independent charities, the Citizens Advice consumer service and national charity Citizens Advice. Together we help people resolve their money, legal and other problems by providing information and advice and by influencing policymakers. For more see the Citizens Advice website.
4. The advice provided by the Citizens Advice service is free, independent, confidential, and impartial, and available to everyone regardless of race, gender, disability, sexual orientation, religion, age or nationality.
5. To find your local bureau in England and Wales, visit citizensadvice.org.uk. You can also get advice online at adviceguide.org.uk
6. You can get consumer advice from the Citizens Advice consumer service on 03454 04 05 06 or 03454 04 05 05 for Welsh language speakers
7. Citizens Advice Bureaux in England and Wales advised 2.3 million clients on 5.4 million problems from October 2013 to September 2014. For full 2013/2014  service statistics see our quarterly publication Advice trends
8. Citizens Advice service staff are supported by more than 21,000 trained volunteers, working at over 3,000 service outlets across England and Wales.