British Gas cuts energy prices

British Gas cuts energy prices

British Gas lowered its residential electricity and gas prices on Thursday in the latest salvo of a price war.

British Gas parent, utility Centrica, said the business was cutting electricity prices by 6 percent and gas prices by 3 percent. Coupled with cuts earlier this year this would reduce the average annual dual fuel bill by 207 pounds, it said.

Rivals Npower, owned by Germany’s RWE, Powergen, owned by E.ON and Scottish & Southern Energy (SSE) have also announced plans to cut their standard tariffs.

However, not all suppliers have cut prices.

“The predicted price war has yet to happen in full as EDF Energy and Scottish Power have still to cut their prices. We expect today’s news to put pressure on these suppliers to act,” Karen Darby, founder of Website said.

“Last week British Gas was criticised for its customer service record, so the energy company acted in the swiftest way it could – by cutting prices,” Darby said.

Energy regulator Ofgem said on Monday the average household could slash its annual energy bill by over 100 pounds by abandoning Scottish Power or EDF Energy, which have not reduced their standard charges.

Spain’s Iberdrola completed a takeover of Scottish Power this week, creating Europe’s third biggest utility.

“Our new chief executive, Jose Luis del Valle, has already started to review all parts of the business and customers can expect good news soon,” a Scottish Power spokesman said.

EDF said its prices were continually under review.

Even after the latest reductions, SSE said it was still cheaper than British Gas, Britain’s biggest domestic energy supplier.

“The best benchmark is the dual-fuel standard quarterly, and we are cheaper than Centrica on average by 40 pounds across the country, even after their reduction today,” SSE Chief Executive Ian Marchant told Reuters.

British Gas has around 10 million gas customers and almost 6 million electricity accounts.


The reduction in gas and electricity bills is likely to help moderate inflation over the next few months, economists say.

High energy prices are the main reason why inflation has been so high over the last year, with consumer price growth spiking to a record high of 3.1 percent in March, according to the Bank of England’s Monetary Policy Committee..

Policymakers are counting on falling household energy bills to help bring inflation back to the central bank’s 2.0 percent target and reduce the need for further interest rate rises.

“This comes too soon to enter the CPI in April so should beef up the drag on the CPI from utilities from May onwards,” said Alan Clarke, an economist at BNP Paribas.

Clarke said this latest price cut would shave about 0.04 percentage points off inflation between May and August.


Power and gas prices soared in 2005 and early last year as tighter gas supplies and rising oil prices spooked the markets, pushing up customer energy costs. However, wholesale prices have fallen since new gas import pipelines from Norway and the Netherlands opened in the latter half of 2006.

The seven-month decline shows no sign of ending in the short term because summer always sees a decline in demand for heating, although some traders do not think prices can go much lower.

After the warmest winter on record according to the Met Office records, Britain’s gas storage sites are fuller than they would normally be at this time of year.

Next winter should see more gas coming to the UK from Norway as another field, Ormen Lange, starts production and new liquefied natural gas import facilities open.

Shares in Centrica were up 0.1 percent at 384-1/2 pence by 2:05 p.m. (British Time), valuing the group at around 14.2 billion pounds.

Information from: Reuters via

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