Page last updated at 11:32 GMT, Thursday, 7 May 2009 12:32 UK

British Gas electricity bills cut

Phil Bentley managing director of British Gas

British Gas has cut its electricity prices by 10% - the last of the major suppliers to do so.

The cut, which will come in with immediate effect, will save 4.5 million customers an average of £43 a year.

The company cut its gas prices, also by 10%, on 19 February this year, benefitting more than seven million households, it said.

But prices should be even lower according to a consumer group who say wholesale energy costs have halved.

British Gas raised electricity prices twice last year, by a total of 26%.

All its electricity customers on standard tariffs - including those with pre-payment meters - will benefit from the 10% price cut.

Pressure on suppliers

"The price of electricity on the wholesale markets has been falling and we've always said British Gas will do what we can to lower prices when we can," Phil Bentley, British Gas managing director told BBC News.

"Today, British Gas customers are paying less for their electricity than they were two years ago," he said.

AVERAGE ANNUAL ELECTRICITY BILLS
Scottish Power £403
EDF Energy £421
British Gas £379
E.ON £423
Npower £437
Scottish and Southern £424
Source: Consumer Focus, based on a consumption of 3,300 kWH

British Gas are the last of six major energy suppliers to cut their electricity prices this year.

E.On, EDF Energy, Scottish Southern, Scottish Power and Npower all started providing cheaper electricity for their customers at the end of March 2009.

However, Ofgem the energy regulator, said the wholesale price of energy peaked in December 2008.

Cuts not enough

"We would have expected much bigger reductions considering that wholesale gas and electricity prices are half what they were at their peak last year," said Robert Hammond, energy expert for Consumer Focus.

"This again raises the question of whether wholesale price cuts are being fairly passed on to consumers," he said.

Suppliers have been given headroom to reduce retail prices in the short term
Dr Craig Lowrey, Energy Information Centre

Some consumer groups have complained the energy companies are quick to put up their prices but slow to bring them down in relation to wholesale prices.

But Ofgem said they while they continue to monitor the situation they have no evidence to support the suggestion.

Analysts believe this latest reduction from British Gas is part of an initial round of tariff cuts by all energy suppliers and predict prices could come down further later this year.

"British Gas now has the cheapest standard tariff for dual fuel customers, " according to Mark Todd, director of Energyhelpline, a price comparison website.

"Other suppliers will hate this and we expect them to retaliate soon with price cuts of their own," he said.

Temporary reductions

However, there are warnings the cuts could be temporary as the cost of wholesale electricity is expected to rise again next year.

"Prices for the period from winter 2010 onwards have either been stable or on the increase because of the expected economic recovery," said Dr Craig Lowrey, head of energy market research at the Energy Information Centre.

"Suppliers have been given some headroom to reduce retail prices in the short term," he said, but added there was a "distinct possibility" they would go up again in 18 months time.



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