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Last Updated: Thursday, 8 February 2007, 14:47 GMT
British Gas to cut energy prices
British Gas van and engineer
Lower wholesale prices have led to the cut
British Gas has said it will reduce its gas and electricity prices next month.

The group says it will cut gas prices by 17% and electricity by 11%. It added that the average annual dual fuel bill would fall by 167 to 953.

British Gas's move has raised expectations that other energy companies might also cut their prices.

The company, owned by Centrica, has been criticised for its high tariffs, which consumer groups say affect vulnerable consumers.

Since 2002, British Gas has increased gas prices seven times and electricity tariffs six times, while it last cut prices in the spring of 2000.

Supplier switch

Experts suggest the latest reductions could help British Gas to hang onto its customers.

More than four million people switched their electricity or gas supplier last year in a bid to cut their bills, recent figures from energy regulator Ofgem showed.

British Gas has lost about one million customers during the past 12 months.

If wholesale prices fall further this year, then we will pass those price reductions on to our customers
Sam Laidlaw, Centrica chief executive

Centrica chief executive Sam Laidlaw said British Gas would now be offering the "lowest prices on the street" to customers, as well as introducing a new social tariff for "very vulnerable customers".

The company announced last month that it would be cutting its prices as wholesale costs had fallen.

But, while welcoming the price cuts, Centrica was criticised for failing to pass on the whole of the 50% fall in wholesale prices to consumers.

The firm had "decided to boost its profits rather than pass on potential savings", Paul Green of Energyhelpline said.

"In the next couple of weeks, we expect all the other major suppliers to announce price falls," he added.

"All the suppliers are likely to follow British Gas by passing on only a small part of the wholesale price falls to their customers.

"This will cause a growing feeling of outrage among consumers as they struggle to pay their winter gas and electricity bills."

Further cuts?

However, Centrica's chief defended the company's decision not to pass on the whole of the drop in wholesale prices.

"We don't go and buy our gas purely on a day-to-day spot basis; we go out and have to buy our gas on a long-term basis," Mr Laidlaw told the BBC.

"If wholesale prices fall further this year, then we will pass those price reductions on to our customers."

British Gas is the first UK company to announce definitive price cuts so far, after a round of increases from various suppliers.

The announcement is set to lead to a raft of price cuts across the industry as firms compete for customers.

Scottish & Southern Energy said they would be cutting prices before 12 March, and would be "cheaper than British Gas", while Powergen also announced it would soon be reducing its prices.

What the cut will mean for customers

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