Npower confirms energy bill cut – but prices are still up

Last month, the Government said it would take action 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).

Now Npower has become the last of the big six suppliers to confirm how it will pass the Government's savings on. Scottish Power and Scottish and Southern Energy (SSE) announced their plans earlier this week – see the Scottish Power and SSE MSE News story for the full details.

Npower says a typical dual fuel user will typically see a £45 reduction in their annual energy bill. The savings will also apply to any new tariffs launched from now onwards.

But all Npower customers, barring those on fixed tariffs, were hit by average hikes of 9.3% on gas and 11.1% on electricity on 1 December, so the firm's cut only reduces the impact of that increase.

The price fall also doesn't mean Npower's tariffs will be the cheapest. Join our free Cheap Energy Club to find the best deal for you.

'These cuts won't touch the sides'

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.

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

What's happening for customers?

Here's what's happening for Npower customers:

• Customers on a standard variable tariff (including prepay customers and those on discounted fixed-term variable tariffs) will see bills fall from 28 February. This is as a result of the Government reducing the cost of the Energy Company Obligation, an insulation scheme delivered by major energy suppliers. It's also due to electricity distribution companies taking voluntary action to reduce their charges. Typical dual fuel customers will see price cuts of £33/year.

• In addition, all electricity customers (including prepay customers and those on a fixed deal) will get a £12 credit to their energy account in the autumn. This comes from a Government rebate of the Warm Homes Discount scheme, which helps those in fuel poverty. It's currently paid for by electricity customers, but the bill will now be met by the taxpayer.

Energy prices could still rise

Even though costs will fall for some, Npower – like Scottish Power and SSE – isn't completely ruling out the possibility of further price hikes this year.

Npower chief executive Paul Massara says: "We don't plan to increase energy prices before spring 2015, unless there are increases in wholesale energy costs or network charges."