Npower Latest Big Six Firm To Cut Gas Prices

By Mark Kleinman, City Editor

Npower will become the fourth of Britain's six biggest energy companies to cut gas prices on Friday as pressure intensifies on suppliers to pass on the benefit of falling wholesale prices.

Sky News has learned that Npower, which is owned by the German utility group RWE, will announce that it is cutting its standard gas tariff by more than 5%, making it the largest reduction unveiled during the current round of cuts.

Scottish Power said earlier this week that it would reduce gas prices by 4.8%, following British Gas, which announced a 5% cut, and EON, which reduced its standard gas tariff by 3.5%.

Npower's move is expected to take effect sometime next month, according to an insider, and will come just weeks after it told the Government that the scope for price cuts was limited by political and regulatory intervention.

"Political factors have...become increasingly significant over the last few years, particularly as we approach the UK general election," Paul Massara, Npower's chief executive, wrote in the letter to Matthew Hancock, the Business and Energy Minister.

"Any change in prices in the short term will inevitably have to take account (of) potential outcomes after May this year."

Mr Massara added in his letter that price reductions were nevertheless being actively considered despite Labour leader Ed Miliband's plan to freeze energy prices until 2017 if the party wins the General Election in May.

Npower's announcement will leave only SSE and EDF Energy as having failed to announce cuts in recent weeks, although the former has already introduced a price freeze.

Mr Hancock is due to meet the six companies next week to discuss the prospect of further price reductions.

Last week, Labour was defeated in a House of Commons vote to secure support for powers for the regulator, Ofgem, to be able to force companies to reduce consumer bills in line with wholesale price movements.

Labour was forced to adapt the language of its energy policy, insisting that the freeze was actually intended to be a cap, although it continues to use the original language in online material promoting one of its flagship policies.

Mr Massara's letter rejected a comparison drawn by Mr Hancock between the approach to price reductions of the "Big Six" and smaller suppliers.

"The proportion of customers on fixed-price contracts is much higher for smaller independent suppliers than it is for large suppliers," he wrote.

Speaking exclusively to Sky News on the fringes of the World Economic Forum in Davos, Mr Hancock welcomed the expected news from Npower.

He said: "News that another energy company is cutting bills for consumers is good news and shows competitive pressure working.

"Four of the Big Six energy suppliers are now set to bring prices down and give hardworking households a better deal.

"Thankfully we didn't listen to Labour who called for us to freeze prices at the top of the market, just like they sold the gold at the bottom when in office.

"I look forward to meeting each of the large energy suppliers next week to ensure they are doing all they can to cut costs for consumers."

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