Energy price war hots up, though tariffs still 'too high'

Update 3pm: Since the story was first published, First:Utility and Scottish Power have cut some online rates. First:Utility's iSave tariff is now marginally the cheapest deal on average, says uSwitch.com, though always compare.

Energy giant E.ON has cut prices on an online tariff to make it the cheapest on average, according to a price comparison site.

The provider's FixOnline3 plan costs £962 a year for a typical family, says uSwitch.com. It makes it £5 a year cheaper than its nearest rival First:Utility

Prices, per unit of energy, will be fixed until December 2010, though there is a £30 fee payable if you switch away.

It won't necessarily be the cheapest for everyone so always compare prices before signing up (see the Cheap Gas & Electricity guide).

Prices still too high

This doesn't mean E.ON is cutting prices across the board. The deal is only available to those who actively switch to this tariff, meaning the vast majority will still pay hugely inflated prices.

Over the past year, the price energy firms pay for power via the wholesale markets has shrunk by 50%, yet suppliers are stubbornly failing to lower household bills by similar margins (see the Energy firms refuse to cut prices MSE News story).

Critics argue prices as a whole are still far too high (see the Time for energy price cuts MSE News story).

Archna Luthra, MoneySavingExpert.com consumer products analyst, says: "While price cuts are welcome it's disappointing these fractional reductions are only for those in the know.

"Everyone else continues to pay over the odds. What must happen is bigger price cuts from all providers in line with decreasing wholesale costs."

Further reading/Key links

Slash energy costs: Cheap Gas & Electricity Capped tariff help: Is your Cap/Fix ending soon?