British Gas to lower fuel bills

Today, British Gas became the first major energy supplier in the UK to announce a reduction in its tariffs for residential gas and electricity customers. From 12 March 2007, British Gas will cut its standard gas tariffs by 17 per cent and electricity by 11 per cent. As a result, the average annual dual fuel bill for its customers will fall from £1,120 to £953.

The announcement comes a day after the Prime Minister added his voice to the debate during Prime Minister’s Question Time (7th February) after another minister raised concerns about the impact that fuel prices are having. He was responding to former Labour minister Tom Clarke (Coatbridge, Chryston and Bellshill) who called for reductions for "long-suffering consumers" as wholesale prices had fallen by a "staggering" 50% since last April.

British Gas has the largest number of domestic customers: around 10 million for gas and just under 6 million for electricity. It has to date been the most expensive supplier charging 16.4% or £158 more than the cheapest available supplier for its standard tariffs. The company has a long standing history of charging premium rates – in fact, only recently the new Chief Executive of British Gas’ parent company, Centrica, acknowledged that “the [British Gas] brand continues to command a premium”.

So, while today’s news is undoubtedly a welcome respite for the company’s long suffering customers, uSwitch.com urges a word of caution, as it fully expects other suppliers will swiftly follow British Gas’ lead by offering further price cuts and even more competitive tariffs.

Ann Robinson, Director of Consumer Policy at uSwitch.com, says: “The news that British Gas, the UK’s biggest energy supplier, has cut their prices by as much as 17% for gas can only be congratulated. Customers will now see their bills fall by as much as £167 for dual fuel – some might say ‘about time’ after 6 ½ years of waiting.

“We predict that British Gas retail energy is on track to make £224 million profit since June 2006, up from £143 million loss in the first half of last year after inflicting two inflation-beating price rises on its customers during the same period. With such big bucks at stake, it’s not surprising that British Gas has been reluctant to wash the jam off its fingers. It is good to see the company has chosen to play fair by its customers rather than playing to its own agenda.

“We expect all other suppliers to swiftly follow suit as we see a price war set in. Whether British Gas will retain its crown as the cheapest for gas and dual fuel for long will be for other suppliers to decide.

“However, for those already in fuel poverty, this move from British Gas really could be ‘too little, too late’. British Gas price rises in 2006 are estimated to have pushed almost 457,000 people into fuel poverty. We estimate that every 1% decrease in its gas prices will pull just over 12,000 customers out of the fuel poverty pit, while every 1% decrease in its electricity costs will help just over 4,000 people out of fuel poverty. In order to rectify the damage inflicted by the company to over 400,000 people by last year’s soaring fuel bills British Gas would need to drop its overall prices by 24%.”

Ann Robinson concludes: “As the largest supplier in the UK, British Gas has a responsibility to monitor its pricing and to understand the impact its prices have on consumers and the economy as a whole. Today’s reductions will bring much-needed respite to British consumers. We can only watch to see now what the domino effect will bring as other suppliers follow suit.”

Amongst the good news for British Gas customers today is:

Click Energy 2 will be the cheapest tariff in the market for dual fuel (based on a comparison on uSwitch.com excluding social tariffs)

British Gas is launching a new social tariff called the "Essentials Tariff" at a cost of £40 million per annum. This will lower tariffs further for vulnerable customers.

The launch of a new tariff called Price Guarantee 2008 which will fix standard rates at no premium, with no exit charge, until May 2008.