Big Six Firm E.ON Cuts Gas Prices By 5.1%

Energy giant E.ON is to cut gas prices by 5.1% as suppliers come under pressure to pass on tumbling wholesale costs to consumers.

The Big Six energy provider said the cut, which will come into effect on 1 February, will knock the equivalent of £32 off the average annual gas bill. Regulator Ofgem said it was a "step in the right direction".

E.ON also said it was launching the cheapest fixed tariff on the market, a one-year dual fuel deal with an average annual price of £783.

Britain's mild winter and the generally low level of commodity prices have seen drops in wholesale gas and electricity costs, according to a report published last week by the ICIS Power Index, prompting renewed calls for suppliers to cut household bills.

Energy Secretary Amber Rudd wrote to energy firms in the middle of last year asking them to pass on a fall in wholesale costs to consumers.

E.ON chief executive Tony Cocker admitted that the fall in wholesale costs could translate to a fall in a dual fuel domestic bill of 10%.

But he said the cut announced today was smaller because the tariff had to "take account of managing the various other risks in the market which can change".

The supplier has 4.5 million residential customers.

It (Other OTC: ITGL - news) is the first of the Big Six providers to announce a price cut this year. The others are British Gas, SSE (LSE: SSE.L - news) , npower, EDF (Paris: FR0010242511 - news) and Scottish Power.

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Ofgem chief executive Dermot Nolan said: "This is a step in the right direction and it is good to see some movement in energy prices for consumers.

"We have consistently called on suppliers to explain why retail prices are not falling and this price cut goes someway towards addressing that challenge."

But price comparison website USwitch said customers may feel "underwhelmed" and that a 10% cut - saving £120 on dual fuel bills - would more accurately reflect the fall in costs.

It also questioned why suppliers were not cutting electricity tariffs (Other OTC: UBGXF - news) .