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British Gas cuts electricity prices but keeps gas on hold

Energy firm cuts 5% off electricity prices and is swiftly followed by SSE cutting 4.5% from its gas tariff

Up to 9 million households will see their energy bills fall after two of the UK largest providers announced price cuts.

More than 5 million British Gas customers will see their electricity bills fall by 5% after the energy provider announced it was cutting its standard tariff with immediate effect. The move was followed swiftly by Scottish & Southern Electricity (SSE), which said it would reduce gas bills by 4.5% with effect from 26 March.

British Gas said 5.3 million dual fuel and single energy customers would benefit from the reduction in electricity prices, with an average saving of £24 a year, and the cut would make its standard electricity tariff the cheapest in Britain.

Meanwhile, SSE said 3.5 million households would see an average price cut of £28 a year when it reduced gas prices for dual fuel and single energy customers.

However, the cuts were smaller than expected and households who buy their gas from British Gas or electricity from SSE will not see those bills cut.

British Gas said it bought the majority of its gas supplies in advance, and “while there have been some short-term falls in the cost, the longer-term trend continues to be upward”. It said prices in the wholesale market for gas to be delivered at the end of 2012 had increased by 14% since the end of 2011.

The energy firm had been expected to cut prices after another of the ‘big six’ energy providers, EDF Energy, announced it would be reducing gas prices by 5% with effect from 7 February, but analysts had expected customers to benefit from a bigger reduction.

In 2011, British Gas was the first energy company to increase costs for consumers, raising gas and electricity prices by 18% and 16% respectively, and its price rises were larger than EDF’s.

Commenting on the price cut Ian Peters, managing director of energy at British Gas, said: “We want to keep prices as low as possible for our customers. Household budgets are stretched and we are doing everything we can to help our customers keep their bills down.

“This price reduction means British Gas is once again offering the cheapest standard electricity, on average, of any major supplier.”

However, the company warned that any reductions in energy bills may be short lived. It told customers: “It it is too early to say exactly what will happen to energy prices. Energy bills include a number of costs, many of which are increasing.”

SSE said recent falls in the wholesale price of gas had allowed it to reduce prices for consumers, but the way it bought energy meant this could not come into effect until March.

It said electricity prices had not come down, but it would extend a promise not to increase bills before August 2012 to October 2012, and would implement more price cuts if possible.

It will also launch a three-year fixed price option for electricity and gas customers, with a premium of 4% on standard prices for those who want to protect themselves against any future rises.

Alistair Phillips-Davies, generation and supply director of SSE, said: “The cut in household gas bills shows customers that we will bring down prices when we can, and our decision to extend to October our pledge not to increase prices will give our customers some additional certainty about the costs they will face in the course of this new year.”

Responding to British Gas’s price cut, Adam Scorer, director of policy and external affairs at Consumer Focus, said while consumers would welcome price cuts, companies needed to narrow the widening gap between wholesale and domestic energy prices.

“While companies will respond differently depending on where they think wholesale prices are heading, wholesale gas and electricity prices have been falling over the last year – this narrowing of costs must be reflected in consumer prices,” he said.

“The widening gap between wholesale and retail prices has become the fault line for consumer confidence. Companies want to regain the trust of their customers – narrowing this gap is a necessary part of achieving this.” © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds