British Gas to reduce household gas prices by 5%

The move will cut the average annual bill by £37

The British Gas announcement comes a week after Big Six rival E.ON became the first to react to falling wholesale gas prices by announcing an immediate 3.5 per cent cut in gas tariffs on 13 January (PA)

British Gas has announced it will cut household gas prices by five per cent next month.

The energy supplier, owned by Centrica, said the move will benefit 6.8 million customers and will reduce the average annual bill by £37.

British Gas said the cut, which will apply from 27 February, reflected the recent fall in wholesale gas prices. It comes after energy suppliers have come under pressure from politicians and regulators to pass on lower costs to households.

The company said most of the gas being used in customers' homes today was bought at higher prices over 2013/14 but wholesale costs for 2015 were now coming down to a level where the reduction could be passed on.

It said it would be keeping prices under review "for further movements up or down".

Prime Minister David Cameron said in a message on Twitter: "It's welcome to see British Gas cutting prices. We'll continue to encourage energy firms to pass on falls in wholesale prices to customers."

Chancellor George Osborne wrote on Twitter: "Good British Gas cutting prices. Real progress. Need to ensure falls in wholesale prices passed on so will continue to monitor very closely."

The British Gas announcement comes a week after Big Six rival E.ON became the first to react to falling wholesale gas prices by announcing an immediate 3.5 per cent cut in gas tariffs on 13 January.

It follows pressure from Labour which proposed to give new powers to Ofgem to allow the regulator to force companies to pass on falls in the price of wholesale oil and gas to consumers.

Estimates suggested this could knock £136 off the average bill.

And the announcement comes less than a month into the tenure of new Centrica chief executive Iain Conn, a former BP executive.

Mr Conn said: "We've been watching the significant moves in the international energy market extremely closely for some time, 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.

"We bear the responsibility of managing the risks of buying energy ahead on behalf of our customers, who value the predictability this brings.

"Taking this decision now, at a time of continuing uncertainty, shows our absolute commitment to pricing competitively, with customers at the forefront of our minds."

However, experts said more still needs to be done. Stephen Murray, energy expert at MoneySuperMarket said: "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."

He went on: "But the most important message for consumers is a simple one: don’t rest on your laurels waiting for a price cut from your energy supplier – do it yourself for an even bigger saving."

Murray added: "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 make the next move and honour the energy savings that really should have been passed on to customers months ago."

Additional reporting by Press Association