British Gas bills coming downPrice cut could save customers £79 a year

23 January 2009

Gas flame inside the gas boiler

You can check the flame through the pilot window on older boilers

Gas and electricity giant British Gas has announced that it is cutting gas prices by 10%.

The price cut will affect British Gas’ standard tariff and the supplier says that 75% of its customers – or 7.5 million households - will benefit from lower prices.

British Gas – the country’s biggest supplier of gas - estimates the price cut will save customers £79 on the average household gas bill. The company says that it decided to cut prices after ‘unprecedented volatility’ in the wholesale gas market.

Prices still high

British Gas raised its prices by 35% last July so customers will still be paying more than they were before that increase. The 10% reduction will take effect from 19 February.

A spokesman said the price of wholesale gas almost doubled last year and other costs, such as transportation, rose sharply.

‘We did end up paying higher prices for this current winter,’ he said.

Commitment to customers

British Gas managing director, Phil Bentley, said the company understood energy prices were a ‘significant cost’.

‘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.’

Mr Bentley said the firm buys gas in advance, which helps it smooth out the effects of sharp rises in wholesale costs, such as the price spike caused by the recent dispute between Russia and Ukraine.

Others to follow suit

Other gas and electricity companies - many of whom raised prices significantly last year – are likely to come under increased pressure to cut bills to reflect falling wholesale costs. These have dropped dramatically in line with the cost of oil, which has fallen from a peak of $147 a barrel last year to around $35 dollars as the global economic crisis deepened.

The UK's second biggest energy supplier, Scottish & Southern Energy, said in November it hoped to cut household energy bills early in the year.

Too little too late

Fiona Cochrane, senior policy advisor at Which?, said: ‘Although welcome, British Gas’ decision to cut gas prices by 10% maybe too little and too late for many consumers struggling to pay bills that were hiked by a record 35% in the summer.

‘When British Gas announced its price rise, the largest made by any of the domestic energy suppliers, in July it said that the increase would take effect immediately, yet customers will have to wait until the end of the winter to see the benefit of the lower prices it has just announced.

'Given that the cost of electricity is primarily determined by the wholesale price of gas, we are disappointed that British Gas has decided not to reduce their electricity prices as well. This is especially disappointing as with over 6 million customers British Gas is also Britain’s biggest electricity supplier.

‘This situation really does highlight the volatility of the prices of gas and electricity and unfortunately consumers will continue to face uncertainty until Britain's energy supplies are sustainable and independent of unpredictable global events. Which? is looking to Government and energy companies to show leadership.’

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