EON SE’s U.K. unit is the first of the nation’s six biggest utilities to announce a cut in household natural gas prices to reflect slumping wholesale costs.
The 5.1 percent reduction, effective on Feb. 1, will lower annual energy bills by an average of 32 pounds ($45), EON said in an e-mailed statement on Wednesday. The new rate will be the cheapest in the market, the company said.
The global gas market is oversupplied and prices in the U.K fell 33 percent last year, following on from a 28 percent slide in 2014. Utilities typically don’t pass on the full extent of declines or increases in the wholesale market because they have to cover fixed costs.
“The underlying position is that whilst the price we pay for our customers’ energy has fallen, we also have to take account of managing the various other risks in the market which can change, and the fact that many of the other costs that we don’t control but do have to bear have increased,” said Tony Cocker, chief executive officer of EON’s U.K. unit.
Utilities have been slow to pass on the benefits of the slump in wholesale prices to customers. Centrica Plc was the last company to cut bills when it lowered tariffs in August.
Bills should be reduced by at least 10 percent on both gas and electricity, consumer lobby group uSwitch Ltd. said in a statement.
“Now is the time for the other major suppliers to step up to the plate and offer decent, double-digit reductions,” Ann Robinson, director of consumer policy at uSwitch, said in the statement.
Dermot Nolan, the chief executive officer of the U.K.’s Office of Gas and Electricity Markets said EON’s move was a “step in the right direction.”
“We have consistently called on suppliers to explain why retail prices are not falling and this price cut goes some way towards addressing that challenge,” Nolan said in a statement.
The U.K.’s Competition and Markets Authority is due to publish its provisional remedies to improve competition among suppliers this month following an industry-wide investigation that started in June 2014.
“The cut has been long overdue,” Elchin Mammadov, an analyst at Bloomberg Intelligence in London, said by e-mail. The “U.K. competition watchdog will be closely watching to see if other suppliers follow suit.”