EON pledges not to raise prices this year

gas burnerAndrew Milligan/PA Archive/Press Association Images

EON has shocked the markets, by announcing that it won't increase the price of its gas and electricity this year. It's a stunning move in a market where it often feels as though prices will just keep rising until we need to have our salary paid directly to the utility companies.

But what does it mean for consumers?
This is excellent news. It's particularly welcome given that on Friday, Centrica (which owns British Gas) was warning that by the winter we could see another round of price rises, with an estimated increase of about £50 per household every year.

Tony Cocker, chief executive of E.On UK said: "Unfortunately global energy markets are expected to see an overall trend of rising wholesale prices but as a company we believe in acting fairly, which means cutting prices when we can and never raising prices unless absolutely necessary."


The experts are delighted. Richard Lloyd, executive director at Which? says:"People tell us that rising energy bills are their biggest financial worry so anything that gives people more certainty can only be a good thing when household budgets are stretched."

Tom Lyon, energy expert at uSwitch.com, says: "There is some uncertainty over prices and consumers will be worried about what this might mean for their bills. While SSE has moved to reassure its customers that they will be protected from higher prices at least until the autumn, E.ON has gone one step further by promising a price freeze throughout 2012. This is good news for its five million domestic customers."

Price war?

And this isn't the end of the good news, because it may well be a sign of more to come, and could show that energy companies are ready for a bit of a price war. We have already seen a spate of different cuts as the wholesale price of energy eased off slightly at the beginning of the year, and prices came down by about 5%. There's now the hope that other energy companies join the party - guaranteeing prices for a particular period and making it easier for us all to know where we stand.

It's unlikely to mean that energy is going to come anywhere near constituting a bargain. However, perhaps it means we can afford to heat our homes this winter without having to make real sacrifices elsewhere in the household budget.

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Of course, they still have every chance to raise prices in January 2013, but it at least gives us a bit of breathing room during the first few cold months of the winter with which to take steps to reduce the energy we use. Lyon adds: "The 2012 price freeze should be seen as a short-term reprieve and customers can use this time to future-proof their homes against higher energy prices in the future."

Lloyd meanwhile points out: "We have already seen one supplier warn that price increases could be on the way, so now is a good time for customers to look at fixed term deals which offer a bit a more security." At the moment uSwitch says Ovo energy is offering a New Energy Fixed tariff with a competitive average annual price of £1,050. Meanwhile, nPower's Go Fix 8 costs an average of £1,087 a year.

But what do you think? Will others follow? Let us know in the comments.
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