Britain's Ovo Energy on Friday became the second small electricity and gas provider to drop tariffs for customers on the back of a fall in wholesale prices, just several months after big suppliers angered users by raising bills.
New customers and existing clients who renew their contracts will from Friday see a reduction of 5 percent for dual-fuel fixed tariffs, resulting in annual bills that are around 133 pounds ($210) less than similar offers from major energy suppliers, Ovo Energy said.
Due to a recent decrease in wholesale costs, we are able to respond and pass on these savings to consumers, thereby giving them a cheaper and simpler alternative to the 'Big Six', said Stephen Fitzpatrick, Ovo Energy's managing director.
The supplier announced in late November it would not go ahead with a planned increase in retail prices as wholesale costs had already started to drop.
Small energy suppliers such as Ovo Energy try to compete with EDF Energy, Centrica, E.ON, RWE npower, SSE and Scottish Power, which together control 99 percent of Britain's energy retail market and are under increasing political and regulatory pressure to open up the market share to rivals.
The major suppliers passed on double-digit price increases from this winter, angering already cash-strapped Britons.
The rise in energy bills helped drive UK inflation rates to a three-year high in September, with consumer prices up 5.2 percent year-on-year, the second-highest gain in the European Union.
Co-operative Energy, also a small supplier and a 2011 newcomer to the retail energy market, was the first provider to announce a price cut to take effect from February.
Unseasonably mild winter weather has been the main factor for a drop in wholesale gas and power prices in Britain in recent months.
Consumer lobby group Consumer Focus said it welcomed Ovo Energy's move to reflect the drop in wholesale prices and urged other energy suppliers to follow suit.
The gap between wholesale and retail prices remains a fault line for consumer confidence in the energy market, said the group's director of energy, Audrey Gallacher.
($1 = 0.6406 British pounds)
(Reporting by Karolin Schaps, editing by Jane Baird)