Energy price cuts leave a £3.7 billion hole in consumer pockets

Households are being left with a £3.7 billion hole in their pockets despite recent energy price cuts, reveals uSwitch.com, the independent price comparison and switching service. Last year, price rises added £4.3 billion in total on to household energy bills. Recent price cuts announced by the big six suppliers will wipe £650 million back off again - leaving a £3.7 billion shortfall.

This year's reductions will chip £56 or 4.3% off the average household energy bill. However, bills rose by £381 or 42% last year - which means cuts will only wipe out £56 or 15% of last year's increases. The average household energy bill in January 2008 was £912, rising to £1,293 following last year's increases. Now, price cuts will bring it down to £1,237 - which means consumers will be paying £325 or 36% more than they were just over a year ago.

Although consumers will be grateful for the £56 respite on bills, the cuts will barely scratch the surface of fuel poverty levels in the UK. Last year's energy price increases saw fuel poverty rocket from 4 million to 5.4 million households. This year's cuts can be expected to pull 172,000 households back out of the trap. uSwitch.com research also shows that fuel poverty can no longer be seen as a ‘pensioner issue' as its net is spreading wider. While 30% of pensioner households are in fuel poverty, so are 20% of families with one income and 17% of single person working households.

There is still a slim hope of a second wave of cuts this year, but consumers should certainly not bank on it. More importantly, any cuts this year look set to provide only short term relief - suppliers are already hinting that prices will be going back up again next year. This makes it vital for consumers to start taking action to bring their energy bills down.

Ann Robinson, Director of Consumer Policy at uSwitch.com, says: "To cash strapped consumers this 4.3% or £56 dip in energy prices will seem like a drop in the ocean, especially when compared with last year's 42% or £381 price hike. Those who were relying on price cuts to bring their energy bills down to a more manageable level will be particularly disappointed. But there could be greater disappointment to come if energy prices start their steady climb upwards again next year.

"While suppliers have reduced prices by £56, consumers could actually cut their own energy bills by up to £350 just by switching. They should move to dual fuel, pay by direct debit and sign up to an online plan to enjoy lower prices straight away. They should then make it a priority to always pay the lowest possible price for their energy and to use less of it. These two simple steps are everyone's most effective deterrent to soaring energy bills."