The power companies have been keen to try and reduce price cuts to a minimum but with OFGEM potentially breathing down their necks they have had to show some cuts to reflect the reduction in wholesale markets.

Both RWE and Powergen see their biggest rival as British Gas, not only has BG gained some power customers it is very good at retaining its exiting gas customers. RWE and PG know that the dual fuel is the option that most plug into the search engines when seeking a knew deal and that they tend to treat them as equal costs (when they are not!) and so they have decided to reduce their gas prices by 16-20% and their power prices by 5-10%, this will not average out as people use very different amounts of gas to power. But it does hurt British Gas who will have to reduce their gas business costs significantly this is their core business and so it is an opportunity to hurt the opposition much more aggressively that at first thought.

The theory of oligopoly is a kinked demand curve where the prices tends to the kink and this is what should happen in the retail utility market. In reality it is not happening with the above pricing plan.