Has the energy price war just started?

Best wishes to everyone for a prosperous New Year
 
This update has 2 topics
 

  • Year-end closing prices for wholesale energy markets
  • Comment on a price cut to ScottishPower’s PriceSure Energy Tariff.

2008 in Summary – Wholesale Markets
 
The table below contains the final closing prices for 2008.
 
On the last day of 2008 trading there was a sharp bounce in oil prices whereas wholesale gas and electricity prices continued to fall. After allowing for these changes, our observations and comments remain as per our 30 December 2008 update.
 

Wholesale Energy Prices Jan 2009

Wholesale Energy Prices Jan 2009


Wholesale v Retail Gas Prices Jan 2009

Wholesale v Retail Gas Prices Jan 2009


Has the energy price war just started?
 
Today (5 January 2009), ScottishPower reduced the price of its PriceSure Energy tariff by 7%.
 
PriceSure Energy is a Fixed Price tariff, which fixes prices until 31 January 2010. It was originally launched on 27 November 2008 at the same level as ScottishPower’s standard prices although, due to the fixed nature of the tariff, it carries an exit penalty of £30 for electricity and £50 for dual fuel (there is no gas only option), if the customer leaves before 31 January 2010. The tariff is available for both new and existing ScottishPower customers.
 
As of today, ScottishPower has cut the price of the tariff by £81 by cutting the gas price component of the dual fuel deal by 10%. There was no change to electricity prices. Even though this is a Fixed Price tariff, the cuts will be applied to existing PriceSure customer accounts. This now makes the PriceSure tariff cheaper than ScottishPower’s Standard prices, and the cheapest fixed price tariff in the market and overall fifth cheapest tariff in the market.
 
Our key observations are as follows.
 

  • It does not affect the vast majority of ScottishPower customers so is not a price cut in the normal sense of the word. Nevertheless, it does set the ball rolling and gives us an idea of what is to follow.
  • If this was translated into an equivalent cut in ScottishPower’s Standard prices then we think that such a move would be disappointing. However, there is nothing in this move that commits ScottishPower to do anything with its Standard tariffs (whether up or down).
  • ScottishPower’s decision to cut the cost of a Fixed Price tariff to existing PriceSure customers is a very positive step, as it was not obligated to do so.
  • We believe that this is just the opening shot in the coming round of price cuts and is expected to set a minimum level for other suppliers to compete with.

 

What we think:
 
Today’s move by ScottishPower is clear first sign that energy bills are headed lower. Although it does not affect the vast majority of ScottishPower’s standard customers it does set the ball rolling and give us some indication of what is to come.
 
While we are strongly supportive of ScottishPower’s early move, we do not believe fixing energy prices at the current time is the right thing to do, even if the premium is as low as this one. In a falling market the best move is to go for the cheapest variable rate deal. In this respect British Gas’ WebSaver 1 tariff not only guarantees an immediate saving but also further savings if British Gas cuts its standard prices by more than 5%. That’s the best deal to go for at the current time.

 
Latest Price Changes

Latest Energy Price Changes Jan 2009

Latest Energy Price Changes Jan 2009


Source; www.TheEnergyShop.com
The increase shown is for the average of Monthly Direct Debit and Cash/Cheque bills (excluding any prompt payment discounts) for the relevant suppliers’ Standard tariff based on an average usage profile.
Aggregate Increase 2008
Aggregate Price Increases Jan 2008

Aggregate Price Increases Jan 2008


Source; www.TheEnergyShop.com
The increase shown is for the average of Monthly Direct Debit and Cash/Cheque bills (excluding any prompt payment discounts) for the relevant suppliers’ Standard tariff based on an average usage profile.
 
Standard Energy Bills
Standard Energy Bills Jan 2008

Standard Energy Bills Jan 2008


Source; www.TheEnergyShop.com
The bill shown is for the relevant suppliers’ Standard tariff (excluding any prompt payment discounts) based on an average usage profile.
 
Best Deals (5 January 2009) Monthly Direct Debit
Best Energy Deals Monthly Direct Debit Jan 2009

Best Energy Deals Monthly Direct Debit Jan 2009


Source; www.TheEnergyShop.com
Best Capped/Fixed Energy Deals (5 January 2008) Monthly Direct Debit
Best Fixed or Capped Deals Jan 2009

Best Fixed or Capped Deals Jan 2009


Source; www.TheEnergyShop.com
Please note that all Capped/Fixed deals now have exit penalties for early termination. Please see our website for further details.

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