British Gas and SSE announce price cuts

British Gas has cut its electricity prices by 5% with immediate effect, while SSE will reduce gas tariffs by 4.5% on 26 March.

The moves come a day after EDF Energy announced plans to cut its domestic gas tariff by an average of 5% owing to low energy use during the mild winter.

The price cuts will add pressure on the rest of the major suppliers to cut their tariffs as wholesale prices dip.

British Gas said the average annual domestic bill would fall by £24.

"We want to keep prices as low as possible for our customers. Household budgets are stretched, and we are doing everything we can to help our customers keep their bills down," said Ian Peters of British Gas.

"This price reduction means British Gas is once again offering the cheapest standard electricity, on average, of any major supplier."

The price cut comes after a 16% rise in electricity prices and an 18% rise in gas prices for British Gas customers in August.

Future costs

The company said that 5.3 million customers on variable tariffs, including those on dual-fuel deals, would benefit from the price cut.

The reduction comes into effect ahead of the EDF gas price cut which comes into force on 7 February. The EDF change is set to cut the typical annual bill by £38.

British Gas said that it was not changing its gas charges because, although there had been some short-term falls in the cost of gas, the longer term trend in wholesale prices was upward. It said it bought its energy in advance.

The company said it was too early to predict what would happen to prices in the future.

The choice to cut the cost of electricity, rather than gas - for which British Gas has more customers - has caused some debate.

"Every drop is welcome but consumers will find it baffling that the company cannot also reduce gas bills as well - especially after the EDF Energy move," said Mark Todd of Energyhelpline.com.

"The maths do not seem to add up so British Gas need to do something on gas as well if they want to look like they are passing on wholesale falls fairly. It may be interesting to note that a 5% gas price cut would have cost British Gas more than double this electricity price cut."

Following suit

Just a few hours after British Gas dropped its electricity prices, SSE - which runs Southern Electric and Scottish Hydro - announced the planned reduction of its gas price in late March.

Some 3.5 million customers would see their typical annual gas bill fall by £28, SSE said.

"Virtually all of the gas being supplied to customers this winter was bought some time ago, but some of the gas that will be supplied to customers from the spring onwards has been purchased since the period of lower wholesale prices began," it said.

"Having analysed and considered the position for some time, SSE is able to announce this reduction in household prices."

The company raised gas prices by 18% and electricity prices by 11% in September.

Adam Scorer, of watchdog Consumer Focus, said that companies would react differently depending on how they expected wholesale prices to change. But he said any drops in wholesale costs should be reflected in the price the consumer paid.