In a letter to energy minister Matthew Hancock, leaked to Sky News, chief executive Paul Massara reportedly said that political factors are becoming “increasingly significant” to the business of energy supply.
The letter comes just a week after both Ed Miliband and George Osborne threatened action to ensure that energy companies pass on the lower costs due to falling energy market prices. Energy companies are said to be hesitant to cuts tariffs in case a Labour party victory in May’s general election allows the party to cap bills.
According to Sky News, Massara’s letter says: “Political factors have…become increasingly significant over the last few years, particularly as we approach the UK general election. Any change in prices in the short term will inevitably have to take account potential outcomes after May this year.”
Labour’s move to force fast-track legislation to allow a political intervention on energy bills was defeated in a parliamentary vote last week. But the pressure to act has forced both Eon and British Gas to offer lower tariffs to their customers.
Eon said last week that it will cut 3.5 per cent from its standard gas tariff with immediate effect while British Gas will slash 5 per cent from its gas tariff effective from 28 February.
The companies join independent suppliers which have offered cheaper tariffs in recent weeks and months. But Massara’s letter claims that comparing their cuts to the big six does not stack up.
“The proportion of customers on fixed-price contracts is much higher for smaller independent suppliers than it is for large suppliers. This allows them to claim that they are reducing prices when in fact they are simply offering a new lower price fixed-price contract for new customers, in the same way we do, which may in part explain your perception that they may have moved earlier,” Sky reported him as saying.
Massara reportedly added that “actions by both government and the regulator means that small supplier have significant benefits in terms of exemptions from licence conditions and also in terms of passing through the cost of social and environmental levies.”