No price cuts yet for British Gas's low-income customers

Moves to cut prices for low-income British Gas customers collapsed in confusion last night as Ofgas, the industry watchdog, abandoned its announcement at the last minute. It means low-spending homes will have to wait for news of price reductions, while bills for most other customers will fall by 9 per cent from Monday. Chris Godsmark reports.

Ofgas had been planning to issue a press release yesterday afternoon which was expected to announce interim price cuts for around a million households with pre-payment meters. But the watchdog unexpectedly changed its mind yesterday evening, without explanation.

Sources close to Ofgas said some technical details about the statement had not been settled. But a spokesman said: "We cannot say anything until Monday. Something should be coming out then."

However a British Gas spokeswoman said the two sides were still negotiating, although Ofgas had been about to fax its press release to journalists. "Discussions have been going on since July and we're still talking. The Ofgas statement was just a skeleton. It's not a big shock horror problem."

The chaos means British Gas will push ahead with nationwide price reductions for 16 million of its 19 million residential customers on Monday, while charges for pre-payment meter households will remain frozen. A further two million homes paying through various budget plans will also have to wait longer to hear whether they will receive any reduction.

British Gas is knocking 9 per cent off bills for customers paying by direct debit, worth almost pounds 29 in annual savings, while homes settling bills promptly will see bills fall by 8 per cent. The reductions are largely the result of cuts in pipeline charges paid to Transco, the pipeline network which is now a separate business to the British Gas supply group.

There had been speculation that Ofgas would reveal price reductions for pre-payment customers of around 3 per cent, worth some pounds 7 off annual charges. The other 2 million low-income homes were expected to have to wait longer to hear whether they would get similar reductions.

The statement would have been seen as a partial victory for the Gas Consumers Council (GCC), which had campaigned to see the national price cuts implemented across all homes. Sue Slipman, the GCC's director, was perplexed about Ofgas's decision to abandon its statement.

"We were very much hoping there would be an announcement. We had been expecting one. We've got no idea why it hasn't been made," she said.