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Low-income gas customers get cut in bills after deal with watchdog

More than a million British Gas customers with pre-payment meters will see annual bills fall by around pounds 7 from next month under a deal reached with Ofgas, the industry watchdog.

After last minute haggling with the regulator, British Gas has agreed to knock about 3.1 per cent off the bills generally paid by the 1.1 million households fitted with electronic pre-payment meters. The reduction is worth pounds 7.30 off an average pounds 235 annual pre-payment meter bill. Homes with older coin-operated meters will have to wait longer for the cut.

From tomorrow 16 million other British Gas customers will see larger cuts, stemming from the reduction in pipeline charges made last year by Transco, which is now owned separately. Direct debit homes receive a 9 per cent cut, worth an annual pounds 27.60.

Confusion over the scale of the pre-payment cuts intensified yesterday, after Ofgas claimed the saving would amount to 4 per cent, or pounds 13. However, the watchdog admitted this figure used the average gas consumption of all homes as a benchmark, including those that pay by direct debit and use more gas. Pre-payment charges vary according to the amount of fuel used, in order to recoup the standing charge.

British Gas said it lost millions of pounds a year servicing pre-payment meter homes, which were subsidised by other customers. "Not all our pre- payment customers are in debt but the majority are. In effect they are getting an interest free loan, which typically takes two to three years to pay off," said a spokeswoman

The Gas Consumers Council, which has campaigned to have the pipeline price cut implemented across all customers, welcomed the reductions but said they needed to go further. Sue Slipman, the GCC's director, said: "Ofgas's work is not completed yet. We will be pushing for more reductions."

However British Gas claimed any additional cuts would have to be part of an "industry wide solution" to the cost of pre-payment customers.

-Chris Godsmark