Britain’s big energy companies are on the brink of a price war after British Gas cut its prices by 7 per cent.
The reduction, which will benefit about 8 million households, is expected to start a battle for customers with E.ON and RWE npower thought to be among the companies considering a cut as early as next week.
Scottish and Southern Energy and Scottish Power are also believed to be studying price reductions.
Centrica, the owner of British Gas, which is Britain’s biggest energy supplier, has been criticised for resisting pressure to reduce the price of gas all winter despite falls in the wholesale gas price that began more than 18 months ago.
“Consumers could have seen prices fall earlier,” said Audrey Gallacher, energy expert at Consumer Focus. “Energy companies should have passed on the wholesale price cuts before winter.”
John Hall, an independent energy analyst, pointed out that the wholesale price of gas was about 35p per therm yesterday, about one third of the levels of more than 100p per therm during mid-2008.
A year ago, prices were at 60p per therm — nearly double the current levels.
“They could have cut prices by 20 per cent a year ago but they chose not to,” Mr Hall said. “They have been under no real pressure to do so.”
In an announcement that is likely to add to the anger felt by many hard-pressed consumers, British Gas is expected to report bumper profits at the end of this month of £540 million for 2009.
The unusually cold weather in December, which forced people to use their central heating systems more often, prompted City analysts to raise their profit forecasts for the company by at least £10 million.
The business is thought to have benefited by about £1.5 million in extra profits each day during the period from mid-December to mid-January when Britain was affected by its most severe bout of winter weather in decades.
On January 7, daily gas demand reached a record high of 454 million cubic metres, up 30 per cent from a seasonal average of 350 million cubic metres.
About 40 per cent of the average annual household energy consumption occurs during the three months between December and February.
Wholesale gas prices have been pushed lower because of the recession, which has reduced industrial demand for energy as factories reduce production levels. Industrial gas demand in Britain has fallen about 10 per cent since mid-2008.
Supplies are plentiful after the opening of new liquefied natural gas terminals at Milford Haven in Wales and imports through a pipeline from Holland and Norway.
Andrew Horstead, energy analyst at Utilyx, the energy and carbon advisers, said: “Given the sizeable drop in wholesale prices from the peaks in 2008, a 7 per cent cut is below our expectations.
“We have already seen a price war in the online market and we hope that this latest move will stimulate a similar response from the other suppliers to pass on lower cost to their beleaguered customers.”
A spokesman for the Department of Energy and Climate Change said: “We have said for some time that householders must start to see the benefit of lower wholesale gas prices. This is very welcome news at a time when many will be facing the prospect of hefty winter bills. We expect to see other firms follow suit as quickly as possible.”
Scottish and Southern Energy and Scottish Power are also believed to be studying price reductions.
Centrica, the owner of British Gas, which is Britain’s biggest energy supplier, has been criticised for resisting pressure to reduce the price of gas all winter despite falls in the wholesale gas price that began more than 18 months ago.
“Consumers could have seen prices fall earlier,” said Audrey Gallacher, energy expert at Consumer Focus. “Energy companies should have passed on the wholesale price cuts before winter.”
John Hall, an independent energy analyst, pointed out that the wholesale price of gas was about 35p per therm yesterday, about one third of the levels of more than 100p per therm during mid-2008.
A year ago, prices were at 60p per therm — nearly double the current levels.
“They could have cut prices by 20 per cent a year ago but they chose not to,” Mr Hall said. “They have been under no real pressure to do so.”
In an announcement that is likely to add to the anger felt by many hard-pressed consumers, British Gas is expected to report bumper profits at the end of this month of £540 million for 2009.
The unusually cold weather in December, which forced people to use their central heating systems more often, prompted City analysts to raise their profit forecasts for the company by at least £10 million.
The business is thought to have benefited by about £1.5 million in extra profits each day during the period from mid-December to mid-January when Britain was affected by its most severe bout of winter weather in decades.
On January 7, daily gas demand reached a record high of 454 million cubic metres, up 30 per cent from a seasonal average of 350 million cubic metres.
About 40 per cent of the average annual household energy consumption occurs during the three months between December and February.
Wholesale gas prices have been pushed lower because of the recession, which has reduced industrial demand for energy as factories reduce production levels. Industrial gas demand in Britain has fallen about 10 per cent since mid-2008.
Supplies are plentiful after the opening of new liquefied natural gas terminals at Milford Haven in Wales and imports through a pipeline from Holland and Norway.
Andrew Horstead, energy analyst at Utilyx, the energy and carbon advisers, said: “Given the sizeable drop in wholesale prices from the peaks in 2008, a 7 per cent cut is below our expectations.
“We have already seen a price war in the online market and we hope that this latest move will stimulate a similar response from the other suppliers to pass on lower cost to their beleaguered customers.”
A spokesman for the Department of Energy and Climate Change said: “We have said for some time that householders must start to see the benefit of lower wholesale gas prices. This is very welcome news at a time when many will be facing the prospect of hefty winter bills. We expect to see other firms follow suit as quickly as possible.”
Source: The Times
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