BRITISH Gas became the latest utility firm to slash its bills but immediately sparked a row for failing to cut prices far or fast enough for cash-strapped customers.
The energy giant, which owns Scottish Gas, cut its gas prices by an average of £37 a year for its 6.8 million customers.
But consumer groups and politicians criticised the firm for not making the cuts bigger and for waiting weeks for the reduction to come into force
British Gas yesterday followed in the footsteps of E.ON – which lowered bills by 3.5 per cent last week – by announcing the average annual bill will fall by 5 per cent.
However, the price cuts will not come into force until the end of February – meaning the company’s higher prices will stand at a time when gas usage is at its highest. E.ON’s reduction was brought in with immediate effect.
British Gas, which has 800,000 customers in Scotland, has also not ruled out further price hikes, saying it will keep its prices “under review” and admitting they could go “up or down”.
Prime Minister David Cameron welcomed the move and said it would not have been possible under Labour’s proposed price freeze.
But Labour leader Ed Miliband said: “A 5 per cent fall is too little and it is too late. It is not nearly good enough. Wholesale prices have fallen by 20 per cent.”
Consumer groups called on the other four members of the “Big Six” – EDF Energy, Npower, ScottishPower and SSE – to follow in the market leader’s footsteps because customers are struggling with high energy bills as the cold weather continues.
They point to the plummeting cost of wholesale gas over the past year and say consumers should be getting better deals from their suppliers as a result.
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Wholesale gas costs fell by 26 per cent between the third quarter of 2013 and the same period in 2014, and have fallen further since, meaning lower costs for the energy companies buying in supplies.
British Gas insisted it was reacting to a current fall in wholesale prices, saying gas used in customers’ homes now had been bought in advance at a higher cost.
It also pointed to the fact wholesale gas prices account for less than 50 per cent of the average dual-fuel bill, with other costs – such as transmission and distribution, and environmental and social levies – making up much of the rest.
Iain Conn, who took over as chief executive of British Gas parent company Centrica less than a month ago, said: “We’ve been watching the significant moves in the international energy market extremely closely, with the aim of helping customers with a price cut at the earliest possible opportunity.
“Operating in such a volatile market, no pricing decision is straightforward.”
Meanwhile, Selkirk-based small supplier Spark Energy which specialises in contracts with the rental sector, also cut prices by 3.4 per cent yesterday.
“Two down, and four to go as British Gas is the next of the Big Six to pass on a much-needed saving to bill payers for 6.8 million of its customers,” said Stephen Murray, energy expert at MoneySuperMarket.
“A cut in energy prices is always welcome; however, just like we saw with E.ON, this decrease is small in comparison to the whopping 20 per cent drop in the price of wholesale gas over the last 12 months.
“Furthermore, British Gas customers will have to wait a whole month before they see any reduction in their bills at a time when energy use is at its peak.”
“The ball is firmly in the court of the remainder of the Big Six who are yet to honour the energy savings that really should have been passed on to customers months ago.”
In the past, when one of the Big Six announced a price rise, the others usually followed suit.
Ann Robinson, director of consumer policy at uSwitch.com, said: “With gas prices falling for well over a year now, today’s decision by British Gas to follow E.ON’s lead with a reduction in standard tariff prices hasn’t come a minute too soon.
“Lower prices are good news for consumers but we believe that prices can and should be cut even further.”
British Gas also yesterday admitted that 1.6 million customers on one of its fixed tariffs will not benefit from the cut, although they will be able to switch. It also revealed 740,000 electricity-only customers will not receive a cut.
Which? executive director Richard Lloyd said: “Every little helps, but this is another modest price cut for consumers in response to a significant shift in wholesale prices.
“The Competition and Markets Authority’s investigation must look at whether falling wholesale energy costs are passed on fairly, or whether a lack of competition leaves us all out of pocket.”
Martin Lewis, founder of Moneysavingexpert.com, said people should consider switching provider to save money.
“The real concern is that people will see this as a message that ‘everything’s fine, my provider has cut prices, things are going to get better’. No, this is wrong. Only switchers get the cheapest prices,” he said. “So do a comparison and see how much you are overpaying.”
Regulator Ofgem said the cut was a “step in the right direction” after it spent months questioning the growing gap between falling wholesale gas prices and those charged to households.
A spokesman said of the price cuts: “In a competitive market we would expect others to follow suit.”
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