E.ON said today that it expects standard tariff customers across the UK to benefit from a reduction in bills of at least GBP85 from this autumn, following falls in wholesale prices of gas and electricity since the start of the year.
Such a reduction would, on average, be the equivalent to a 7.5% cut in energy prices or almost four weeks' energy use for an average UK home2.
The expected reduction in standard tariff prices will be confirmed in August when the energy regulator, Ofgem, sets out the level of its latest market-wide cap, to be effective from the beginning of October.
The price cap limits what suppliers can charge an average user2 on a default tariff and represents Ofgem's view of the efficient costs companies face in supplying energy to customers. It is based on the wholesale cost of energy the amount providers pay for gas and electricity on the markets and a range of other factors including social and environmental obligations, network costs, the cost of the smart meter rollout and customer service costs.
Explaining the detail behind the expected level of the reduction in the price cap, E.ON UK Chief Executive Michael Lewis said: 'Whilst wholesale prices have continued to fluctuate in recent weeks, we saw significant falls since the start of the year driven by COVID-19 and the subsequent lockdown around the world: businesses suspended operations and their energy demand collapsed, flights were grounded and people stopped travelling and remained at home.
'That dramatic fall in demand for energy including oil and gas -caused wholesale energy markets to fall rapidly since the price cap was last amended at the start of this year. Because of this we expect a significantly lower level when Ofgem updates the price cap next month. Such a move also means customers should see the benefit of lower bills in time for the colder months of the year.
'I know people have used more energy at home whilst in lockdown, but the increase in domestic use doesn't come close to the fall in industrial energy demand or the collapse of the oil price in the wake of global transport restrictions. Added to that, wholesale market costs represent less than half of the total energy bill and we must factor in other influences such as the cost of social and environmental programmes that larger energy suppliers collect on behalf of Government, as well as distribution and other costs that they collect for other industry players.'
E.ON customers already benefit from electricity backed entirely by 100% renewable sources3 which means more than three million homes have an electricity supply backed by renewables including wind, biomass and solar.
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