British Gas in 10% price cut

22 January 2009

British Gas has announced it will cut the price of gas by 10% - becoming the first major energy company to announce a price reduction since 2007.

The 10% cut in standard tariff gas prices will take effect from 19 February and is estimated to benefit more than 7.5 million customers, British Gas owner Centrica said in a statement.

Phil Bentley, managing director of Centrica, says: "At British Gas we understand energy bills are a significant cost and we are committed to providing the best possible prices for customers. 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."

Last year, the energy giant was criticised for piling more misery on cash-strapped households – raising its energy prices by 15% in January and by a record 35% in July. Other suppliers increased their prices by more than 20%.

However, as the cost of crude oil falls, energy providers have been under intense pressure to reduce gas and electricity bills. Crude oil peaked at almost $150 a barrel in July, but slumped as low as $38 earlier this month as the global economic downturn continues to reduce demand.

Bentley explained that the Centrica had protected consumers against steep oil prices last summer by buying gas in advance, which helped protect against sudden rises in wholesale prices caused by events like the oil row between Russia and the Ukraine.

With lower oil prices and an end to the dispute, rival energy companies are expected to follow suit. "Russia only effectively turned back on gas supplies to the rest of Europe on Tuesday so hopefully we can see some stability introduce into the wholesale gas markets across Europe, helping sustain potential price drops in the UK," said a spokesperson for energy price comparison website

But while the spokesperson welcomes the reduction, they believe that customers can save much more by shopping around. “While the cut will help to 7.5 million householders on a standard British Gas tariff, they could immediately save a lot more by shopping around.”

According to Energylinx, British Gas’s Web Saver 1 tariff, launched on 18 December last year, is one of the most competitive tariffs in the UK.

British Gas is also to introduce a ‘prompt payment discount' of up to £15 per year for customers on standard gas tariffs who pay quarterly. For those standard tariff customers paying by direct debit, British Gas will automatically reduce their payments by 10% when the price cuts take effect.

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