Millions of Scottish Power and Scottish and Southern Energy (SSE) customers will see their bills fall, after Government moves to cut the cost of energy tariffs – but the savings will just trim both firms' winter price hikes, so the net result is that prices are still up.

The Government announced a raft of measures last month to reduce the impact of social and environmental programmes on energy bills. It said this would save the average dual fuel customer £50 a year, without reducing help to vulnerable households or sacrificing green commitments (see the Government shakes up energy bills MSE News story).

At the time Scottish Power said these savings would be passed onto some of its customers in "early 2014". It's now confirmed the typical standard dual fuel bill will fall by £42/year on 31 January and by £12 in autumn – a total cut of £54/year. The savings will also apply to any new tariffs launched from now onwards.

Meanwhile, SSE says it will cut bills for all customers by £38/year for a typical user from 16 June, although this will be backdated to cover the entire period from 24 March. All its electricity customers will also receive a £12 Government rebate in autumn. The savings will apply to any new tariffs launched from now onwards.

These price cuts won't mean these tariffs will be the cheapest. Join our free Cheap Energy Club to find the best deal for you.

MoneySavingExpert.com's energy analyst Archna Luthra says: "Any cut is a welcome one, but these reductions won't even touch the sides and some suppliers aren't applying the cuts to all tariffs.

"Overall we've still seen price hikes, and in the long-term prices are likely to be only going in one direction.

"Npower needs to pull its finger out and implement the reductions. The money the Government has released should be in our pockets not theirs."

"If you haven't already, you should urgently consider grabbing a cheap fixed tariff – many can save and lock in prices long-term, even up to four years."

Martin Lewis
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What's happening for Scottish Power customers?

Here's what's happening for Scottish Power customers:

  • Customers on a standard variable tariff (including prepay customers): Typical dual fuel users will see bills fall by £42/year on average on 31 January. This is due to the Government reducing the cost of the Energy Company Obligation (ECO), an insulation scheme delivered by major energy suppliers, and electricity distribution companies taking voluntary action to reduce network costs. 
  • All electricity customers (including prepay customers and those on a fixed deal) will get a £12 credit to their energy account in autumn, funded through the Government's rebate of the Warm Homes Discount (WHD) scheme. The WHD helps those in fuel poverty, and is currently paid for by electricity customers. The cost will now be met by the taxpayer.

Fixed electricity customers will get the £12 rebate, but the majority won't benefit from the £42/year reduction.

Scottish Power says this is because at present, 97% of its customers on a fixed deal already pay less than its new standard tariff prices. It adds these customers were protected from the rising cost of green levies as they were not hit by the firm's 8.5% average gas hike and 9% average electricity hike that came into force last month.  

However, the 3% of customers on fixed and capped products that pay more on average than Scottish Power's new standard variable prices, will see their bills fall on 31 January in line with the firm's new average standard bill. Prices will then remain fixed for the remainder of their contract.

What's happening for SSE customers?

Here's what's happening for SSE customers:

  • All customers (including prepay customers and those with fixed or capped deals): Typical dual fuel users will see bills reduced by £38/year for a typical customer from 16 June, although this will be backdated to cover the entire period from 24 March. This is due to the Government reducing the cost of the Energy Company Obligation (ECO), an insulation scheme delivered by major energy suppliers, and electricity distribution companies taking voluntary action to reduce network costs. 
  • All electricity customers (including prepay customers and those on a fixed deal): Will receive a £12 rebate from the Government in autumn as a result of the WHD being paid for through general taxation.

The overall saving for SSE customers equates to around £50 a year (or roughly 4%) for both fixed and capped customers and for a typical dual fuel customer on a variable tariff. But the savings will only slightly reduce the firm's 8.2% average gas and electricity hike that came into force from 15 November 2013. 

Energy prices could still rise

Despite the announcement costs will fall for some, neither Scottish Power or SSE have ruled out the possibility of further price hikes this year. Neil Clitheroe, the firm's energy retail and generation chief executive says: "We recognise that we need to continue to work hard to reduce bills for our customers through offering competitive fixed priced products and comprehensive energy efficiency advice.  

"As part of this ongoing commitment, we will try to avoid any further price rises in 2014 but this will depend on whether there are increases in wholesale energy prices or other costs outside of our control."

Will Morris, group managing director of retail at SSE, says: "As well as cutting prices in the short term, we have also promised to cap our prices at the new, lower level until spring 2015, subject to there being no marked and sustained increase in wholesale energy costs, network costs or new policy-related costs."

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