Two regional electricity companies, Eastern and Midlands, immediately announced price cuts of up to 3.9 per cent for customers. Midlands said the typical annual bill will be pounds 266, while Eastern's 3 million customers will receive a one-off rebate of up to pounds 11 this year.
Professor Stephen Littlechild, director-general of Offer, said he intended to cut the subsidy - known as the fossil fuel levy - from 10 per cent of the average bill to 3.7 per cent. The first phase of the cut will apply from 1 November to 31 March.
Professor Littlechild promised a further review in the autumn of 1996 to assess the levy required from 1 April 1997. "However I anticipate that it should be possible to maintain or reduce the rate from 1 April," he added.
The move had been expected as part of the process of the sale of British Energy, operator of the eight most modern nuclear reactors. The levy was brought in at the privatisation of the electricity industry in 1989 to subsidise the nuclear industry's heavy maintenance and decommissioning costs.
Professor Littlechild said the new rate would cover payments due to the non-privatised part of the industry, including the ageing Magnox reactors, as well as subsidies for renewable sources such as wind-power.
The Industry and Energy Minister, Tim Eggar, applauded the announcement as "yet further good news for electricity consumers".
He said: "Electricity bills are already at the lowest level in real terms since 1974 and consumers also received a discount of just over pounds 50 in the first quarter of this year, following the National Grid flotation."