British Gas expects £100 drop in annual dual fuel bill

Residential customers of British Gas got some good news from a recent news release. The energy giant expects the trend toward lower energy costs to continue, reflecting an average annual savings of some £100 on a dual fuel bill.

The news was made as a part of a profit warning to investors. This is good news to customers who are looking for ways to offset other cost increases such as rent hikes and higher food costs. There are two primary reasons for the trend.

1. 2014 has proven to be a milder year than previous years. The reduced use of energy is one major reason that bills have shrunk. The average customer has simply used less energy to heat their home. Natural gas usage dropped 21% and electricity another 7% for the first 10 months of 2014 as compared to the same time period in 2013. Lower consumption means lower bills.
2. Natural gas prices are dropping as higher supplies are cutting the price of futures. Wholesale natural gas prices are 25% less than they  were a year ago. While energy firms claim that prices are often set as far as three years in advance, it still reflects a potential source of competition that could drive prices lower. Sky News reported that SSE was considering a reduction in what it charged residential customers. One reason could be to make it more competitive as many customers begin to shop around for the best rates. Speculation has also been that the utility provider is attempting to avert scrutiny from the Competition and Markets Authority over whether the bills are fair to customers.

The combination of less usage and downward pressure on the pricing due to a drop in raw material costs is good news for customers. Their bills are expected to be about £100 less for 2014 than they were during the prior year.

The impact on fuel bills in 2015 is less clear for a couple of reasons.

1. Natural gas prices are expected to remain low. This should entice energy providers to cut rates in order to gain new customers. They are also under scrutiny to ensure that rates are fairly priced to reflect the reduction in fuel costs to the utility.
2. The expected El Niño may cause usage to increase, which would offset any rate reductions. BBC’s Paul Hudson warned that the El Niño of 2009-2010 cause bitter cold in the UK. A repeat occurrence could cause energy usage and bills to skyrocket. Hudson did note though that the previous El Niño of 2006-2007 was relatively mild. If the next one is mild, then there should be no noticeable increase in energy usage.

For customers who are already struggling with high living costs, any possible bill reduction is welcome news. This is a change that could affect every household.

Customers who are still unable to afford their fuel bills due to hardship and reduced income may wish to request assistance from their energy supplier or related charities.