uSwitch gas & electricity news February 2007

npower is the latest energy supplier to drop prices, reducing its standard rates by 16% for gas and 3% for electricity. The decrease will make npower's average annual prices £920, £33 cheaper than British Gas’s standard plan¹. npower has also added heat to the online war by offering an additional £21 discount to customers who sign up to its online dual fuel plan. This makes its online tariff £4 cheaper than British Gas's Click Energy 2².However the news has been dampened by the fact the price decreases will be not become effective on standard plan until 30th April, although the online tariffs are available immediately for new customers. With suppliers concentrating their biggest discounts on online plans, uSwitch.com is predicting a customer exodus from standard to online plans.

Ann Robinson, Director of Consumer Policy at uSwitch.com commented; "Suppliers are making it clear that the best deals to be had are online so consumers should dump expensive standard tariffs and move onto the most competitive online tariff as quickly as possible. If everybody on a standard tariff was to do this it would really hit suppliers where it hurts, in the pocket."

¹ 1. Based on a medium usage (20,500 kWhs gas, 3,300 kWhs electricity) customer paying quarterly by standard credit, on standard tariffs, averaged across all regions.

² Based on a medium usage (20,500 kWhs gas, 3,300 kWhs electricity) customer, paying monthly by fixed Direct Debit, averaged across all regions.

Just seven days after British Gas announced it would be reducing its energy prices from March 12th, Powergen have responded by launching three new capped plans guaranteeing to beat British Gas's prices for its standard plans¹. The plans, "Energy Guarantee", "Electricity Guarantee" and "Gas Guarantee" are guaranteed to be cheaper than British Gas until 1st September 2008 and if British Gas reduces its standard prices further, Powergen will reduce prices too.

Powergen also announced a reduction in its online plan, "Energy Online Saver" of 4.2%.² It has also confirmed that there are further price reductions to come.

2006 saw wholesale gas prices fall by 50%, yet domestic bills rose by an average of 38% at an average cost of £277. With two major suppliers announcing price cuts in a week, there is increased pressure on the other energy suppliers to follow suit and pass on the benefits of falling wholesale gas prices. If there is a price war, the winners will be the consumers who've never switched before.

¹ Powergen promise that your electricity and gas prices will be lower than British Gas quarterly cash cheque prices - now and until 1 September 2008 - Powergen press release 15th February 2007.

² Total discount now available to dual fuel customers paying monthly by fixed Direct Debit on Powergen's Energy Online Extra Saver product as compared to previous discounts for this tariff.

British Gas has today announced a long awaited cut in its gas and electricity prices, the first fall in prices since 2000¹. It’s the first of the big six suppliers to cut its prices across the board. Other energy companies are expected to act swiftly and decrease their prices too so that they undercut British Gas once again.

• a 17% decrease in gas prices
• a 11% decrease in electricity prices
• a 15% decrease for dual fuel customers

The changes to British Gas’s tariffs take effect from March 12 2007 and are:

• a 17% decrease in gas prices
• a 11% decrease in electricity prices
• a 15% decrease for dual fuel customers

This will reduce the average bill size for British Gas customers to²:

• £586 for gas
• £381 for electricity
• £953 for dual fuel

In addition, British Gas’s online tariff, Click Energy 2, is now set to become the cheapest dual fuel tariff available in the market³.

Although most commentators expect energy prices to fall further, British Gas has also introduced a new fixed tariff. Price Guarantee 2008 will allow customers to fix their bills until May 2008 but, unlike some previous fixed rate deals, they won’t have to pay a premium to British Gas’s current standard rates.

The big question however is how other energy suppliers will respond and how quickly. Traditionally, when one of the big six energy companies announces a price change of this magnitude, the remainder follow within a few weeks.

Indeed one other energy company has already promised price cuts this year and npower has decreased its online tariff for new customers. Historically, British Gas has been the most expensive supplier in the market and its own chief executive has admitted that its brand continues to attract a premium. Energy experts expect that British Gas will become the UK’s most expensive energy supplier once again other energy companies have announced their price decreases.

Ann Robinson, Director of Consumer Policy at uSwitch.com, said: “The news that British Gas, the UK’s biggest energy supplier, has cut their prices can only be congratulated. Customers will now see their bills fall by as much as £167 for dual fuel⁴ - some might say ‘about time’ after 6½ years of waiting.”¹

She continued: “We expect all other suppliers to follow suit swiftly as we see a price war set to begin. Whether British Gas will retain their crown as the cheapest for gas and dual fuel for long will be for the other suppliers to decide. We can only watch to see now what the domino effect will bring as other suppliers follow suit.”

¹ Centrica Pricing Statement – 8th February 2007. British Gas last decreased their consumer gas rates in the second quarter of 2000, this is based on a medium usage (20,500 kWhs gas, 3,300 kWhs electricity) customer paying quarterly by standard credit, averaged across all regions and sourced from Ofgem.

² Based on a medium usage (20,500 kWhs gas, 3,300 kWhs electricity) customer paying quarterly by standard credit, averaged across all regions. Based on the 17% gas and an 11% electricity decrease announced by British Gas on 8th February 2007.

³ Based on a comparison on uSwitch.com excluding social tariffs

⁴ Based on a medium usage (20,500 kWhs gas, 3,300 kWhs electricity) customer paying quarterly by standard credit, averaged across all regions