- Falling wholesale costs prompts expected cut equivalent to about 5.5% off standard tariffs
E.ON said today that it expects standard tariff customers across the UK to benefit from a reduction in bills of at least £70 from this autumn, following falls in wholesale prices of gas and electricity since the start of the year.
The expected reduction in standard tariff prices will be confirmed in August when the energy regulator, Ofgem, sets its latest market-wide cap, to be effective from the beginning of October. Such a reduction would be the same as a 5.6% cut in energy prices and the equivalent of almost three(2) weeks’ energy use for an average UK home.
The price cap limits what suppliers can charge an average user(3) on a default tariff and represents the costs companies face in supplying energy to customers. It is linked to the wholesale cost of energy – the amount providers pay for gas and electricity on the markets – and a range of other factors including social and environmental obligations, network costs, the smart meter rollout and customer service costs.
Explaining the detail behind the expected level of the reduction in the price cap level, E.ON UK Chief Executive Michael Lewis said: “While wholesale prices have spiked sharply in recent days and weeks, the overall trend of the markets has been generally downwards since Ofgem’s last price cap change back in early spring.
“A range of external factors including plentiful energy supplies and mild weather conditions have driven a falling market in recent months and because of this we expect to see lower prices when Ofgem updates the level of the cap next month. That means customers should see the benefit of lower bills in time for the colder months of the year.
“Ofgem’s last change to the price cap was a significant increase, in excess of the original price cap reduction, caused by rising wholesale markets in the latter part of last year, so we hope customers will be heartened by an expected reduction in the coming weeks. Wholesale market costs represent less than half of the total energy bill and we must factor in other influences such as the cost of social and environmental programmes that larger energy suppliers gather on behalf of Government, as well as distribution and other costs.”
Michael Lewis added: “E.ON customers already benefit from our most recent announcement – that we are now providing them with a source of electricity backed entirely by 100% renewable sources. That means more than three million homes now have an electricity supply matched by renewable sources including wind, biomass and solar – the largest offering of its type to date in the UK.”
To find out how E.ON can help customers find an energy solution that is smart, sustainable and personalised for them please visit: eonenergy.com/renewable
2 = Based on Ofgem average UK dual fuel energy consumption and a standard variable tariff in line with default price cap level of £1,254 from 1st April 2019