British Gas price cut puts heat on rivals

Long-suffering domestic customers of gas and electricity consumers were last night advised to 'watch this space' following news that British Gas is to slash its prices.

Long-suffering domestic customers of gas and electricity consumers were last night advised to "watch this space" following news that British Gas is to slash its prices.

The long overdue move will have been welcomed by hard-pressed homeowners who have seen their bills rocket over the past few

years.

From March 12, British Gas will cut its standard gas tariff by 17pc and electricity by 11pc, unmeaning that an average annual dual fuel bill will fall from £1,120 to £953.


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Consumer watchdog Energywatch said it thought the move would be "the first strike in a battle by all energy companies to lower

prices and fight to attract new customers".

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And with the Bank of England deciding to keep the base rate on hold yesterday, there will be hopes that falling fuel prices will mean a cut in inflationary pressures and less chance of future rate rises.

But praise for the British Gas announcement was tempered with frustration at the length of time it has taken for prices to start falling, and by the fact that yesterday's move means prices are still much higher than they were when the tariffs started going up four or five

years ago.

And although the price cut will see the company become the cheapest "dual fuel" provider - at least for now - it will still be the fourth-most expensive of the "big six" providers for its electricity-only tariff.

British Gas has increased its gas prices on seven occasions since 2002, with electricity tariffs rising six times. It last cut prices was seven years ago.

Parent company Centrica said the cuts were the result of average wholesale gas prices falling by nearly 50pc since last year, and the price decrease follows the opening of new gas pipelines into the UK from Norway and the Netherlands, as well as the impact of a previously mild winter.

Rex Humphrey, chief executive of Age Concern Norfolk, welcomed yesterday's news, but said there was still much for the energy companies to do.

"As far as we are concerned, we need to see prices come down dramatically," he said. "Fuel prices have been very high and it's a real concern for many people."

Mr Humphrey added that although the British Gas price cuts were announced yesterday, the changes would not kick in until next month - and in the meantime, many

people would be receiving

their highest energy bills yet.

"High fuel prices have a particularly big effect on people on fixed incomes," he said.

"A lot of people who are perhaps unable to leave their homes very often need their heating on all the time, and they are often the people who are worst affected."

While the price cut could lead to a rush by consumers to switch their domestic fuel providers, analysts are warning people to sit tight for a few weeks to see how the market settles down, with today's cheapest deal likely to be usurped over the coming days as rival providers jostle for position at the top of the best-buy tables.

Powergen immediately responded to British Gas's announcement yesterday by pledging to cut its own prices in the near future, and Scottish & Southern Energy, which owns brands such as Southern Electric, has already told its customers that it will introduce price cuts.

Yesterday's announcement came just a day after the prime minister added his voice to the clamour calling for action during his weekly House of Commons question-time session.

He was asked about the issue by a backbencher who was calling for reductions for "long-suffering consumers" as wholesale prices had fallen by a "staggering" 50pc since last April.

Despite haemorrhaging customers since the markets for domestic electricity and gas was opened to competition in the late 1990s, British Gas still has the lion's share of the market.

About 10 million people use the company for gas and it has nearly six million electricity customers.

Ann Robinson, director of consumer policy at Uswitch.com, a price comparison website, said: "Customers will now see their bills fall by as much as £167 for dual fuel - some might say "about time" after six-and-a-half years of waiting.

"We expect all other suppliers to swiftly follow suit as we see a price war set in. Whether British Gas

will retain its crown as the cheapest for gas and dual fuel for long

will be for other suppliers to

decide."

Paul Schofield, of Moneysupermarket.com said: "Wholesale prices started to fall some time ago, so many people will say that this cut is overdue.

"British Gas has claimed the high ground by now being the cheapest in the market for dual fuel with its Click Energy 2 product, although it is unlikely to hold this mantle for long once the imminent round of price cuts follow.

"However, it is still a poor deal for those languishing on separate gas and electricity tariffs."

He added: "The other major energy providers will be hot on the heels of British Gas with further price reductions, meaning British

Gas will only briefly be one of the cheapest in the market."

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