British Gas customers are to have their bills cut by up to £10 a year.

Announcing the cuts, the energy watchdog Ofgem said improved competition would reduce bills even further.

However, the reductions are lower than the £14 average Ofgem had originally proposed.

Price controls being introduced by the regulator mean standard and pre-pay customers will see their bills fall by £10, while customers on British Gas's Promptpay scheme will pay £8 a year less.

But the controls will not apply to 5m customers who pay their gas bills by direct debit and already receive a discount.

The new measures will take effect from 1 April and will be held in place for a year.

By then the regulator expects competitors to British Gas to be sufficiently established for price controls to be removed.

Callum McCarthy, director general of Ofgem, said: "The competitive market is already delivering prices below the levels Ofgem is imposing by regulation. The price cuts announced today are likely to be the minimum. In practice, customers can expect better offers."

Mike Alexander, managing director of British Gas Trading, which is owned by Centrica, said: "While we will have to work hard to achieve the demanding reductions proposed today by Ofgem, we welcome the intention to remove price controls for all gas customers."