British Gas today said it was cutting its gas and electricity prices from next month.
The energy supplier, which is part of Centrica, will cut standard tariffs for gas by 17% and electricity by 11%.
As a result, the average annual dual fuel bill for its customers will fall by £167 to £953.
The price cuts, which come into force from March 12, represent the first such move by a major power supplier following a series of price hikes.
Centrica chief executive Sam Laidlaw said British Gas would now be offering the "lowest prices on the street".
A new social tariff would also be introduced for "very vulnerable" users such as those on income support and pension credit, he said.
Mr Laidlaw defended the decision not to pass on the whole of a 50% drop in wholesale prices on to customers.
But he pledged that any further falls this year would be reflected in lower bills.
"We don't go and buy our gas purely on a day-to-day spot basis; we go out and have to buy our gas on a long-term basis," he told BBC Radio 4's Today programme.
"As prices come down we are the first to push through these price reductions.
"We are cutting prices by 17% - that's £170 a customer.
"We said back in December that we would do it in the spring. Here we are on, I think we would all acknowledge, a very cold day in the middle of winter so we are bringing it forward to pass this cost reduction through to our customers."
"If wholesale prices fall further this year then we will pass those price reductions on to our customers."
A lot of work - including major investment in new pipelines - had been done to prevent future price "spikes", he pointed out.
British Gas increased gas prices on seven occasions since 2002, with electricity tariffs rising six times. It last cut prices in spring 2000.
Centrica said it was able to act today because average wholesale gas prices this year were almost half the level seen during 2006.
The decrease follows the opening of new gas pipelines into the UK from Norway and the Netherlands, as well as the impact of a previously mild winter.
The company said British Gas was now the cheapest gas supplier for the majority of UK energy customers. The business had 16 million gas and electricity customers at the end of last year.
Mr Laidlaw said new undersea pipelines were now delivering additional gas supplies to the UK.
He added: "These new supplies of gas have directly led to the fall in wholesale prices which we can now pass on to our customers. Our price cut still enables British Gas to make a sustainable margin in 2007 and allows for further investments in the future."
Gary Smith, national officer of the GMB union, which represents workers at British Gas, said: "This announcement will be welcomed by consumers.
"However, the ups and downs on energy prices over the past year have shown that the industry's regulator, who is supposed to look after the interests of consumers, is a chocolate soldier.
"The GMB wants to see the Government get rid of the regulator and take over that role themselves and be accountable to parliament."Reuse content