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British Gas reveals 5% price cut with average annual bill set to fall by £35

Published 15/07/2015

British Gas has announced a 5% price cut
British Gas has announced a 5% price cut

British Gas is to reduce household gas prices by 5%.

The company said the second price reduction in six months will mean annual energy bills will fall by an average of £35.

The price cut for 6.9 million British Gas customers on standard and "fix & fall" tariffs will come into effect on August 27.

Managing director Mark Hodges said the cut reflects lower costs.

He said: "British Gas is committed to offering competitively priced products and the price cut we're announcing today demonstrates that.

"It's the second price reduction from British Gas this year, bringing bills down by an annual average of £72.

"There are a range of costs that make up energy bills, some decreasing and others increasing. This reduction reflects our lower projected total costs for 2015 and 2016 and we're pleased that customers will see the benefits in their gas bills ahead of next winter."

The company said the gas price cut announced today is an average reduction of 5%, with variations reflecting the cost of distributing energy to different regions.

Price comparison website said British Gas was the first of the Big Six energy suppliers to respond to recent falling gas wholesale prices.

Energy experts expect major rivals - EDF, npower, E.ON, Scottish Power and SSE - to respond to the reduction by British Gas over the following days.

But British Gas faced criticism for failing to bring the cut into place sooner than the end of next month.

Stephen Murray of said: "Whilst customers have to be notified 30 days before any increase to price, a cut in bills can be brought in immediately, so it's disappointing to see that this isn't the case and British Gas is making its customers wait over a month before they see this reflected in their bills."

British Gas insisted that bringing in the cut at the end of August gives customers clarity over what they will be paying for the winter and allows the firm to properly publicise its reduction across its various tariffs.

Mr Hodges said electricity prices will remain unchanged, as transmission and distribution costs as well as other levies are expected to rise by 4% over the year.

Brokers at Jefferies said wholesale 2015/16 winter gas prices have fallen by 23% in the last 12 months.

They added that British Gas was now the cheapest of the Big Six for standard tariffs, although they said there were cheaper fixed price tariffs available.

The price cut comes two weeks before British Gas's parent company Centrica will release its financial results on July 30 for the first half of its year.

The firm has previously said it expects profits from British Gas to be higher this year compared with a year ago, when the weather was particularly mild.

The price cut also comes after watchdog the Competition and Markets Authority (CMA) last week said British households are overpaying for their energy by around £1.2 billion a year and are failing to switch to get the best deals.

The CMA said its year-long inquiry into the energy sector found tariffs offered by the big six energy suppliers were around 5% higher than they should be between 2009 and 2013.

It outlined plans to encourage customers to switch, but stopped short of recommending a break-up of the energy giants, saying competition in wholesale markets was working well.

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