Gas price cuts 'likely in spring'

Prices charged by all the major suppliers rose sharply last year

Scottish Power has raised hopes that energy bills are to fall after it launched a cheaper tariff, with rivals expected to follow suit.

The firm has announced that it is relaunching one of its fixed-price gas products with a reduction of 10%.

Energy companies are expected to cut their prices by about 10% in the next three months, as they pass on the lower wholesale gas prices.

The average UK bill is £1,293, some 42% higher than the same time last year.

The expected falls would come after a round of big rises at the end of last summer.

'Optimistic'

All the "big six" energy companies raised their gas and and electricity prices at the time, with British Gas owner Centrica increasing gas prices by a record 35% and electricity prices by 9%.

ENERGY PRICE INCREASES SINCE SUMMER 2008 EDF Energy: Gas +22% Electricity +17% British Gas: Gas +35%, Electricity +9% Eon: Gas +26%, Electricity +16% Scottish & Southern: Gas +29.2%, Electricity +19.2% Scottish Power: Gas +34%, Electricity +9% Npower: Gas +26%, Electricity +14%

At the end of 2008, Scottish and Southern Energy said it was "optimistic" that domestic prices could be cut early in 2009.

"Today's move is significant only in that it gives the biggest hint we've had so far of the level of energy price cuts consumers can expect in early 2009," said Will Marples, energy expert at uSwitch.com.

If a 10% cut was applied to both gas and electricity, it would shave £129 off the current average total power bill taking it down to £1,164, according to uSwitch.

Wholesale falls

The price of gas on the wholesale market has fallen by about 30% since mid-2008.

Suppliers say that contracts that they took out during the summer are now coming to an end, allowing them to benefit for from the current lower market price.

The industry is still under investigation by the energy regulator, Ofgem, which is looking into how it passes on cuts to its customers.

In its interim report in December, Ofgem said the pace of delivery of the cuts had to be faster.

It added that the big six energy suppliers had indicated that further price cuts should reach at least £200m.