Ovo Energy announces 2.5% price cut

The Oxford Times: Stephen Fitzpatrick, managing director of Ovo Energy
Stephen Fitzpatrick, managing director of Ovo Energy

An energy company has announced a 2.5% price cut for consumers, saying that the mild winter weather has meant that gas and electricity are cheaper.

Ovo Energy claimed that the reduction meant its bills were now about £180 a year cheaper than the average of the Big Six companies which supply the bulk of the UK's households.

The "insurgent" company's chief executive Stephen Fitzpatrick said that the energy market was not working efficiently for consumers, with the big companies relying for much of their profit on customers' reluctance to switch away from the names which supplied their areas pre-privatisation.

Mr Fitzpatrick told BBC Radio 4's Today programme: "Today we are announcing a relatively small price cut - 2.5% - but it's the fourth price cut we've had since September.

"What we've seen is the weather over this winter has been quite mild and it's led to gas and electricity prices falling by about 6% or 7% and on top of that we are starting to see some impact from the Government policy where they have asked distributors and network companies to try to reduce their cost.

"The rates that we are charged for accessing the pipes and the wires has fallen for next year following some Government intervention, so that's feeding through as well. I think today we are going to be £180 cheaper than the average Big Six standard tariff that most people pay."

As a smaller company, Ovo has not had to pay the green levies which fund Government schemes to help tackle fuel poverty.

But Mr Fitzpatrick denied that this was the key to his company's prices, claiming that giants like British Gas have used them as an "excuse" for high bills.

"We are about 18% cheaper than the average Big Six standards tariffs and green levies comprise about 3%," he said. "And actually this year we are going to have to pay them anyway.

"We do a lot of small things better and it all adds up. We are smarter about the way we buy energy. For example, we've been buying a lot of energy in the last couple of weeks as prices have fallen. We didn't lock in at very high prices and our customers are benefiting from that."

Mr Fitzpatrick said that many customers were paying more than they had to for energy.

"If British Gas charge the same for gas as the other five, their customers would save £900 million a year," he said. "Their profits last year in the retail business were about £700 million. They have got 40% of the gas market and they charge about 11% more for gas than any of their peers.

"If you look at regional electricity suppliers, they all used to have a regional home base where they have much higher market shares than they do nationally. What we are seeing is that the incumbents from various different regions will tend to charge more in those regions, and that's where a lot of their profits come from - ex-incumbent advantage."

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