British Gas yesterday opened a price war in Britain's residential energy market, choosing the day of the worst weather of the winter to announce the first big reductions in domestic bills for six years.
From March 12 British Gas will cut its prices for gas by 17% and for electricity by 11%, a move which will force other five big energy supply companies to follow suit. The company said the price reductions will result in average annual dual fuel bills falling by £167 to £953. It also said it will remove the price premium paid by its poorest, pre-pay customers who will see bills fall by 24%.
The announcement sent British Gas to the top of the table for cheapest suppliers, but immediately prompted its rivals into claims that they too would be announcing similar price falls. Scottish and Southern Energy, previously the cheapest supplier, promised a rapid response. "We are surprised it [the British Gas cut] was not a bigger reduction. They are not leading the market, they are playing catch-up," said a spokeswoman. SSE has already promised its customers a price cut and the spokeswoman said details would be announced before British Gas implemented its reduction. "It's going to blow them out of the water," she said. Richard Frost, spokesman for npower, which advertises the fact that it charges less than British Gas, admitted his company will have to take action in response to yesterday's announcement.
One industry source said: "Everyone will have to reassess their pricing plans, everyone will have to push prices down whether they like it or not." News that prices have started falling was welcomed by the industry regulator Ofgem, charities and consumer groups.
Ofgem had warned energy firms that it expected to see the fall in wholesale prices over the last nine months to flow through to domestic bills. Yesterday its chief executive, Alistair Buchanan, said: "British Gas has today fired the first shot in what Ofgem expects will be the start of another battle for customers. Over 4 million customers changed energy supplier last year ... the heat is now on British Gas's rivals who will have to consider how to respond."
Prior to this announcement, British Gas had the highest prices of all the big six power companies, and lost more than 2.7m accounts - 2,471 every day - over the last three years. Earlier this year it emerged that its market share had dropped below 50% for the first time.
Ann Robinson, director of consumer policy at uSwitch.com, which helps consumers find the most competitive energy prices, said: "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. To rectify the damage inflicted ... by last year's soaring fuel bills British Gas would need to drop its overall prices by 24%."
Average household energy bills are now 69% - or £407 per year - higher than they were in January 2004. The average bill for gas and electricity is now around £1,000 a year a household. All power companies have raised their prices at least twice in the past 12 months and blamed the rise in prices on the wholesale gas market. However, since April last year, wholesale prices have fallen by 50%, prompting allegations that the power companies have been slow to pass on price reductions.
Phil Bentley, managing director designate of British Gas, said: "We are taking the lead in passing on the benefits of falling wholesale gas prices. As a result of this move our customers will be better off and for many vulnerable households that struggle to balance their bills, our social tariff will remove the burden of not being able to access our cheapest prices."
Joe Malinowski from energy price comparison website TheEnergyShop.com said: "The British Gas price cut is unquestionably good news for consumers. It may have been a while coming, but the cut in domestic gas prices was larger than generally expected, and is likely to start a price war among the energy suppliers."Help the Aged's director of communications, Steve Jones, said: "We are delighted to see British Gas lowering prices. This will be particularly welcomed by vulnerable older customers living on fixed incomes."
From March 12 British Gas will cut its prices for gas by 17% and for electricity by 11%, a move which will force other five big energy supply companies to follow suit. The company said the price reductions will result in average annual dual fuel bills falling by £167 to £953. It also said it will remove the price premium paid by its poorest, pre-pay customers who will see bills fall by 24%.
The announcement sent British Gas to the top of the table for cheapest suppliers, but immediately prompted its rivals into claims that they too would be announcing similar price falls. Scottish and Southern Energy, previously the cheapest supplier, promised a rapid response. "We are surprised it [the British Gas cut] was not a bigger reduction. They are not leading the market, they are playing catch-up," said a spokeswoman. SSE has already promised its customers a price cut and the spokeswoman said details would be announced before British Gas implemented its reduction. "It's going to blow them out of the water," she said. Richard Frost, spokesman for npower, which advertises the fact that it charges less than British Gas, admitted his company will have to take action in response to yesterday's announcement.
One industry source said: "Everyone will have to reassess their pricing plans, everyone will have to push prices down whether they like it or not." News that prices have started falling was welcomed by the industry regulator Ofgem, charities and consumer groups.
Ofgem had warned energy firms that it expected to see the fall in wholesale prices over the last nine months to flow through to domestic bills. Yesterday its chief executive, Alistair Buchanan, said: "British Gas has today fired the first shot in what Ofgem expects will be the start of another battle for customers. Over 4 million customers changed energy supplier last year ... the heat is now on British Gas's rivals who will have to consider how to respond."
Prior to this announcement, British Gas had the highest prices of all the big six power companies, and lost more than 2.7m accounts - 2,471 every day - over the last three years. Earlier this year it emerged that its market share had dropped below 50% for the first time.
Ann Robinson, director of consumer policy at uSwitch.com, which helps consumers find the most competitive energy prices, said: "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. To rectify the damage inflicted ... by last year's soaring fuel bills British Gas would need to drop its overall prices by 24%."
Average household energy bills are now 69% - or £407 per year - higher than they were in January 2004. The average bill for gas and electricity is now around £1,000 a year a household. All power companies have raised their prices at least twice in the past 12 months and blamed the rise in prices on the wholesale gas market. However, since April last year, wholesale prices have fallen by 50%, prompting allegations that the power companies have been slow to pass on price reductions.
Phil Bentley, managing director designate of British Gas, said: "We are taking the lead in passing on the benefits of falling wholesale gas prices. As a result of this move our customers will be better off and for many vulnerable households that struggle to balance their bills, our social tariff will remove the burden of not being able to access our cheapest prices."
Joe Malinowski from energy price comparison website TheEnergyShop.com said: "The British Gas price cut is unquestionably good news for consumers. It may have been a while coming, but the cut in domestic gas prices was larger than generally expected, and is likely to start a price war among the energy suppliers."Help the Aged's director of communications, Steve Jones, said: "We are delighted to see British Gas lowering prices. This will be particularly welcomed by vulnerable older customers living on fixed incomes."
Source: The Guardian
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