Challenger energy brand Igloo has passed on savings from tumbling wholesale gas prices to its customers, but major energy suppliers are unlikely to join them in slashing bills.
Igloo announced Tuesday that it would be cutting gas bills by up to 30%. The actual price reductions will vary based on where customers live, due to regional differences in the cost of distributing gas.
However, Igloo said the price cuts would mean its 92,000 customers would pay an average of £320 less a year for dual fuel tariffs than they would for a standard tariff from the Big Six. Standard tariffs are price-capped at £1,127 a year for a household with typical use and all members of the Big Six—British Gas, EDF, E.ON, Npower, Scottish Power and SSE—charge just under that ceiling.
Igloo said it was passing onto consumers savings from a falling wholesale gas market. Gas prices, already down across 2019 due to the oil price war between Saudi Arabia and Russia, have been further dampened as the coronavirus lockdown suspended manufacturing and business around the world, slashing demand.
Day Ahead contracts for gas delivery had already slumped from 58p a therm in January 2019 to 28p a therm at the beginning of the year and have crashed still further since, to a 10-year low of below 17p a term in recent days. Wholesale energy costs typically make up about 40% of the average energy bill.
Igloo said the price cuts would assist customers who have seen their energy consumption rise as they’re stuck at home.
Igloo chief executive Matt Clemow said: “The impact of Covid-19 has been significant, reducing global natural gas prices dramatically, and is changing the way customers use energy at home, so we’re taking action early to pass on these significant savings as any good supplier should.”
However, market watchers said it was unlikely large energy firms would follow suit, particularly as they feel the impact of supplying customers who struggling to pay bills during the coronavirus crisis.
Following discussions with Ofgem, energy firms have committed to not cut off supply for anyone struggling to pay their bills during the lockdown. But supplying all consumers, including those currently unable to pay, means they’re taking on debt, which may sting later.
Suppliers have also pledged to help pre-payment energy customers top up their meters without venturing to corner shops, including by sending out pre-loaded keys for meters. British Gas is reportedly posting keys with credit top-ups worth £50 to consumers. Many firms are unlikely to recoup those funds.
OVO, the UK's second-largest energy supplier, has set aside £50 million to help its customers experiencing financial hardship during the pandemic, including with payment holidays and pre-loaded keys for meters. Meanwhile, trade body Energy UK, which represents most energy suppliers in the UK, has asked the government for a loan scheme worth up to £100 million a month for the industry, so they can allow consumers to delay payment on their bills.
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