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More a Scrape than a Cut: E.ON’s Prices Disappoint Many

By David Holmes on March 11, 2010

In an era of economic hardship, the rising cost of fuel bills has become a major concern for the average household. Britain’s leading energy providers, which include British Gas and E.ON, have been accused of raking in profits generated by cheaper wholesale fuel costs.

Unfortunately, the major energy suppliers have argued against passing on cheaper wholesale fuel costs to customers and have instead suggested domestic consumers must brace themselves for even greater fuel bills over the next decade. Nevertheless, high fuel bills have attracted widespread criticism and a negative public reaction, so a number of suppliers have taken steps to reduce prices in the short-term.

British Gas, for example, recently cut its gas prices; although, shortly afterwards, the energy giant increased the cost of its HomeCare policies, which are subscribed to by around 4.5 million customers. In a move to copy British Gas, German-owned E.ON, which has around 5.5 million customers in Britain, also reduced its gas prices – albeit on a decidedly small scale. In fact, E.ON has cut its gas prices by a paltry £3.50 a month and refuses to make any reductions for its electricity customers. As one national tabloid noted, the £3.50 monthly reduction is equivalent to a pint of beer and a bag of crisps, so the cuts are unlikely to save any household from fuel poverty; although, ironically, they may help to reduce bills further by keeping pub-loving customers out of the house for longer at weekends.

E.ON’s gas cuts will average £42 over the year, which is not a substantial saving but may be sufficient enough to make a small difference to customers whose finances are strictly controlled. However, the reduced gas prices are thought to be available to only a third of E.ON’s customer base in Britain, which is equivalent to approximately 1.9 million customers. Energy expert for the Consumer Focus watchdog, Robert Hammond, commented on the so-called pack mentality of the leading energy firms. Mr Hammond added: “It speaks volumes that this announcement is remarkably similar to ones made by E.ON’s competitors”. British Gas recently dropped its gas prices by £55 per year, whilst Scottish & Southern Energy offered a £30 annual saving.