Energy company Ovo has announced it is reducing the price of its fixed dual fuel tariff by 5%, shaving about £55 off the average household's annual bills.
The cut, which follows the company's decision not to take part in the last round of energy price rises, is in response to recent falls in wholesale energy costs and puts the spotlight on other gas and electricity providers.
Ovo said that from 6 January it would charge 4.94% less for its New Energy fixed tariff, meaning the average UK household would face a bill of £1,061 a year.
The price cut is not, however, available to customers who are already locked into a fixed contract with Ovo – they must wait until that deal ends before they can make the switch.
Stephen Fitzpatrick, Ovo Energy's managing director, said: "Due to a recent decrease in wholesale costs we are able to respond and pass on these savings to consumers, thereby giving them a cheaper and simpler alternative to the 'big six'.
"January is always a challenging month for everyone's bank balances, so we are delighted to do what we can to help make paying for energy a little easier."
Audrey Gallacher, director of energy at Consumer Focus, said cuts would be welcomed by consumers dealing with a 14% increase in energy bills since summer 2011.
Gallacher said: "This is a market fundamental which must be reflected across the sector if wholesale costs continue to fall. The gap between wholesale and retail prices remains a fault line for consumer confidence in the energy market. The further the wholesale price falls, the greater will be the clamour for others to follow Ovo's lead."
Ovo's price cut follows a 3% decrease from Co-operative Energy announced in December.
Price comparison site uSwitch said Ovo's New Energy deal was now the second cheapest tariff on the market after First:Utility's iSave Dual Fuel V9, and offered a saving of £66 a year on average over the big six suppliers.
Tom Lyon, energy expert at uSwitch, said: "This is the kind of consumer friendly move we have come to expect from Ovo. In one fell swoop it has given cash-strapped consumers a lending hand, become the second cheapest energy supplier on the market and laid the gauntlet down to the big six suppliers."
He added: "The move is another reminder why smaller players are so welcome in the market: they are nimble enough to be able to turn price cuts around far more quickly than the bigger players, making them a good consumer friendly alternative."
Comments
6 January 2012 9:54AM
It had been too mild for them to cut prices. My heating has either been off or on 1-3 of 10 since October.
I know households with women in them have it on 9-10 all the time, but there must be others out there who also aren't using.
It is the right of the energy cartels to make the profits they want in any way they have to. They will have planned to make £x including the 20% hike on gas, so if they aren't making it they see the difference between old and new wholesale prices their right and no need to reduce prices.
Just like the stock market and banking sector, they have a right to that money and no one will stop them.
Good old New World Order Free Market Capitalism, be aware that the value of your investment can go up as well as up.
6 January 2012 9:56AM
Could you please clairify that they have cut not only the unit rate but also the standing charge.
A quick look on their website and their unit rates are quite low however the standing charge is very high. Between 84 and 100 pounds per year.
Cutting the tariff is very often a misleading statement.
6 January 2012 10:03AM
"a lending hand"?
Surely a helping hand or lending a hand?
6 January 2012 10:32AM
The writer seems unaware of basic contract law. A customer who agrees to a fixed contract with an energy company is betting that the non-contract price is likely to rise over the period of the contract and that the higher unit price of the contract tariff will be more than offset by that price rise, so will save over the contract term. If, as expected, the non-contract price subsequently rose, should the customer complain that he/she is paying too little? You can't have your cake and eat it, and the writer is just being needlessly provocative.
6 January 2012 11:00AM
Apologies - I was trying to be clear, rather than provocative. Sometimes people who are on deals with companies wonder if any new offers apply to them, so I thought it was worth spelling out that in this case it didn't.
A lot of the fixed tariffs have charges for moving - anyone signing up to one may want to check how much it will cost them to get out if prices do fall.
6 January 2012 11:05AM
Co operatve emailed me on 22nd December to tell me that we were getting 2.5% off gas and 3.5% of electricity.
As they are already pretty cheap I was pleased as punch.
6 January 2012 11:08AM
In fact here is a copy of the email(hope this works)
Dated 22nd December
Dear Customer
We are very pleased to tell you that we are reducing our prices from 1 February 2012.
The average reduction will be 2.5% for gas and 3.5% for electricity. This equates to a reduction of about £35 per year for an average dual fuel consumer. The reductions apply to the unit rate; the standing charge is unchanged.
We are able to do this because wholesale energy prices have been falling in recent weeks as a result of the mild Autumn. As a co-operative owned by our customers, we want to pass on the benefit to our customers as soon as possible.
This makes us cheaper for dual fuel than the standard tariff prices of all the major suppliers in all parts of the country.
Further information about this price reduction, including questions and answers, are enclosed with this letter. There is also more on our website at www.cooperativeenergy.coop
If you want to spread a little happiness to your friends this Christmas, why not introduce them to Co-operative Energy under our ambassador scheme and earn valuable extra points or donate double the reward to charity?
6 January 2012 12:01PM
cool.
let me know your account number and I'll quote it when I switch to get you the points mentioned at the bottom!
6 January 2012 1:16PM
Thats very nice of you,but we don't shop at the co op,or bank with them etc so we don't collect the points.Thanks anyway :)
6 January 2012 2:21PM
Like you I was pleased to receive an email from the Co-Op notifying me of a price reduction.
Straightforward charging and reasonable standing order cost.
6 January 2012 3:31PM
When ScottishPower announced price increases last year our household switched to OVO via the Uswitch website. I fixed for a year and I am happy with that as it currently saves me around £30 a month on what SP were going to charge. I am now delighted that come June I want be expecting any price hike from OVO given this news. (and thanks Hilary for the confirmation that as a fixed contract I wont get the benefit stright away..some peple do like to nitpick eh idiotsavant?)
It was an easy switch and the billing process is simple.
I cannot understand why more people have not done the same as £30 x12 = £360 is a hefty saving over the year.
PS there was no way I was going to use British Gas, Npower, Edf as I have got plenty of consumer horror stories about all three of those. Good for OVO!!
6 January 2012 3:38PM
Sorry for the belated response - I asked Ovo for the breakdown and I have been waiting to hear back. It says the cut in the tariff is made up of a reduction in unit rates for both gas and electricity, and in the standing charge for gas. However, the standing charge for electricity has seen an average increase of 5.5p a day.
6 January 2012 4:31PM
I am with Co-operative Energy. I received an email from them stating that they were reducing my bill by 2.5% for gas and 3.5% for electricity.
6 January 2012 4:47PM
I've been with Ovo for the past 2 years and just renewed on a fixed contract last week. They promised that if they cut their prices in the 60 days after renewal I would be able to switch to the new tariff so it will be interesting to see if they will live up to that promise.
I can't see anything on the website about the new rates though.
6 January 2012 9:24PM
Ovo are great anyway. In my experience, best customer service ever. They set realistic monthly direct debit charges, pay interest on credit balances and are very straightforward to deal with. Would highly recommend them, price drop or not.
6 January 2012 11:15PM
Must be a thing with smaller suppliers as we get great customer service from co op aswell :)