Gas and electricity supplier E.ON is to increase prices for customers by an average of 3.7%, it announced today.

Chief executive Tony Cocker said changes announced by the Government earlier this week had reduced the overall level of the rise that was necessary to cover extra costs.

The company said it was “working hard to limit the impact on its customers” by announcing a lower average percentage rise than any other major supplier.

It will see the average variable dual fuel bill go up by 3.7% or £48, electricity only prices go up by 3.7% or £20, and gas only climb by 4.6% or £37. The changes will take effect from January 18.

E.ON also said today that it was introduce simplified discounts, moving from percentage to pound values. so that even with the new price rise around one in four E.ON customers would see lower bills than before.

It also said it would automatically inform online-registered customers on fixed deals if new cheaper deals were offered.

Mr Cocker said: “There is no escaping the simple fact that any price rise is unwelcome news for customers. We know that, which is why we have held off for longer than most of our competitors and worked hard to keep our rise as low as possible. However, now more than ever, the help we offer our customers, in terms of advice and practical measures, is absolutely vital.

“We have moved quickly to pass on the benefits of changes announced by the Government at the beginning of this week. This means we have reduced the overall level of a rise that is necessary to cover the extra costs we are seeing in some areas, as well as making sure we continue to deliver a sustainable future for all of our employees and maintain our investment in the UK.

“Whilst there can be no guarantees, the likelihood of further price rises over the next 18 months caused by an increase in the cost of social and environmental obligations has receded due to the recent action taken by the Government.”

The German-owned E.ON group’s UK business includes the retail arm of the former Eastern Electricity company and retains a substantial customer base in the region as it still supplies all those households which have never switched supplier since the introduction of a competitive market.

The increase by E.ON is the last to be announced by the so-called Big Six firms that dominate the energy supply market.

British Gas customers were told they faced a 9.2% tariff increase, with SSE prices going up 8.2%, npower 10.4%, and Scottish Power 8.6%.

However, they have said they will pass on savings from a shake-up on green levies announced earlier this week that it is estimated could shave £50 off bills.

EDF has announced a 3.9% rise, saying it was holding back the full impact of rising costs in anticipation of the Government’s changes.

While E.ON’s rise is lower than those of its rivals, it is still higher than the inflation rate of 2.2%.