Why Big Six energy price cuts can still be beaten

Both British Gas and ScottishPower have announced cheaper gas prices in the past few days, grabbing lots of headlines in the process.

Great news, you might think, except for a few fairly important details. For one, the cuts don’t actually come into effect in February, when in theory much of the coldest winter weather is over and we’ll be using less gas.

There’s also the fact that despite the price reductions these two suppliers remain pretty expensive and easily beaten by other suppliers in many parts of the UK.

And the cuts are still well below the drop in the wholesale price of gas, which has plummeted by 20% in the past year.

Price cuts

British Gas announced that it is cutting gas prices by 5% from 27th February, reducing the average bill by £37 a year.

Meanwhile, ScottishPower says it is lowering its gas prices by 4.8% from 20th February, which it says will cut the annual average bill by £33.

Yet even with these changes between them both companies only offer one tariff that makes the current top 10 best buy table for dual fuel. That’s ScottishPower’s just-launched Online Fixed Price Energy February 2016 tariff.

British Gas currently doesn’t have a dual fuel tariff with an average annual cost below £1,000, putting it way behind the competition.

Even with the gas price reduction, its tariffs aren’t going to trouble the market leaders.

And, rather than cut prices for customers, instead it’s offering a £50 Amazon gift certificate to people who switch to its Fix & Reward February 2016 tariff.

Only E.ON passed on its gas price cut of 3.5% immediately.

British Gas and ScottishPower have both said that they have had to wait until now to pass on the drop in wholesale prices. There's also the spectre of possible Government price intervention in the energy market after May's General Election, which means the bigger energy companies don't want to cut too much now.

What this means is it's worth looking at what other, smaller companies are offering if you want to potentially save on your bills.

[How to give yourself a pay rise]

Cheapest tariffs right now

As you can see from the table below, there's a price war going on to offer the cheapest tariff among the smaller suppliers.

Energy supplier	Tariff	Type of tariff	Average annual cost
Extra Energy	Fresh Fixed Price Jan 2016 v8	Fixed (until January 2016)	£918
Extra Energy	Clear Fixed Price March 2016 v4	Fixed (until March 2016)	£919
First Utility	iSave Fixed March 2016 (v44)	Fixed (until March 2016)	£919.49
OVO Energy	Better Energy Fixed (Online)*	Fixed (for 12 months)	£920
E.ON	EON Fixed 1 Year v14 Paperless	Fixed (for 12 months)	£922.99
Extra Energy	Bright Fixed Price Jan 2016 v8	Fixed (until January 2016)	£925
ScottishPower	Online Fixed Price Energy February 2016	Fixed (until February 2016)	£930
Green Star Energy	Rate Saver 12 Month Fixed 1501	Fixed (for 12 months)	£931.60
E.ON	E.ON Fixed 1 Year v14 Paper	Fixed (for 12 months)	£932.99
Co-operative Energy	Fair & Square March 2016 v2	Fixed (until March 2016)	£944

Source: lovemoney gas and electricity comparison centre

Prices based on average consumption as measured by Ofgem of 13,500kWh of gas and 3,200kWh of electricity and a customer paying by monthly direct debit including VAT.

*Not available in region 17 - Scottish Hydro area

With the rest of the Big Six (EDF, npower and SSE) likely to follow suit and implement small cuts in gas prices only, it's not worth sticking with a Big Six supplier simply in the hope of lower prices soon.

[Compare all the gas and electricity tariffs in your area and see if you could save]