Page last updated at 13:36 GMT, Thursday, 22 January 2009

British Gas in 10% gas price cut

British Gas managing director Phil Bentley said millions of homes should benefit

British Gas has said that more than seven million households will benefit after it cut its standard tariff gas prices by 10%.

The move, which comes into force on 19 February, will trim 84 from the average annual gas bill, it added.

But observers said that even if rivals followed suit, it was "too little and too late" to make a significant difference to winter fuel bills.

The firm's price cuts will not apply to those on fixed tariffs.

'Committed'

British Gas, which is part of the Centrica group and trades as Scottish Gas in Scotland, raised its gas prices by a record 35% in 2008, while other companies lifted prices by more than 20%.

At the end of last year the "big six" energy companies were urged to pass on lower wholesale gas prices.

British Gas managing director, Phil Bentley, said the firm understood that energy prices were a "significant" part of their customers' outgoings.

Will British Gas and the like who pushed their customers for three-year fixed deals last summer help those who signed up to higher prices?
Steve, Folkestone

"We are committed to providing the best possible prices for customers," he said.

"This price cut will go some way to helping customers manage their budgets, and we will continue to do what we can, when we can."

Adding pressure

Watchdog Consumer Focus welcomed the price cut, saying British Gas had "done the right thing".

But chief executive Ed Mayo added: "There are millions of electricity-only customers that will not see a penny off their bill.

"We will now turn the heat up on the other five companies that are keeping prices sky-high."

It's going to give some customers a bit of respite at a time of year when they are are going to be spending significant amount on heating their homes
Tim Wolfenden, USwitch.com

Meanwhile, Age Concern said that, unless there were further price cuts from all suppliers across all tariffs, "many of the poorest pensioners will continue struggle to pay their energy bills".

"Even with price decreases, millions of the poorest pensioners and families will still be living in fuel poverty and will continue to pay more for their energy than wealthier customers," said the charity's director, Gordon Lishman.

'Grand gestures'

The cost of wholesale gas is linked to the price of oil, which has fallen significantly from the peak it reached in summer 2008.

Frankly it would be more realistic to reward customers who manage to pay their bills at all, let alone before the due date arrives
Rob Ridge
Simply Switch

Mr Mayo said: "Consumers would not have to rely on occasional grand gestures by energy companies if the market was more transparent and competitive in the link between wholesale and retail prices."

British Gas's move was a "positive first step" towards lower prices, said Tim Wolfenden, head of home services at price comparison website USwitch.com.

"It's going to give some customers a bit of respite at a time of year when they are going to be spending a significant amount on heating their homes," he said.

But he added that by only cutting gas prices and leaving electricity alone, the move suggested suppliers were feeling "very cautious".

"Energy price cuts are likely to be too little and too late to help consumers with this winter's fuel bills. More importantly, it is now looking highly unlikely that price cuts are going to wipe out last year's painful hike in household energy bills."

Other firms were likely to cut prices fairly swiftly, Mr Wolfenden added.

And he urged people to see whether they could get a better deal on their energy bills - especially if they had never swapped supplier before.

British Gas is also offering a 15 annual discount for people who pay their bills promptly.

But Rob Ridge of comparison website Simply Switch said that idea was "particularly galling given the pressure household finances are under".

"Frankly it would be more realistic to reward customers who manage to pay their bills at all, let alone before the due date arrives."

At the beginning of January, Scottish Power, one of the major suppliers, said it was relaunching one of its fixed-price gas products with a reduction of 10%.

Bar chart shows consumer gas prices since 2003

Consumer gas prices*

Jan Jan Jan Jan Jan Jan Jan 19 Feb
Supplier 2003 2004 2005 2006 2007 2008 2009 2009
British Gas 347 402 451 515 707 568 882 794
EDF Energy 302 338 377 470 641 576 801
Npower 308 358 402 466 628 532 797
E.ON-Powergen 291 346 391 493 644 541 809
Scottish Power 305 330 392 463 622 590 912
SSE 305 352 366 453 607 533 801
Average Bill 310 354 397 477 641 557 834



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