Gas price cuts will leave 3m customers in the cold

Some 3 million low income households are to be excluded from price cuts by British Gas next year, which will knock pounds 28 off average bills for its remaining 16 million customers.

Centrica, the demerged British Gas supply business, has limited the pounds 28 cut to the 6 million homes that pay bills by direct debit and a further 10 million that settle bills within 10 days. The 3 million low income homes left out of the reductions, of which 1 million have pre-payment meters, will instead receive a only a price freeze when the cuts start on 12 January.

The move means those excluded will get almost no benefit from the reduction in pipeline charges in the new price formula for Transco, part of the former British Gas, or from the abolition of the gas levy announced in the Budget. The levy, which disappears in April, was a special tax on old North Sea gas contracts.

Roy Gardner, Centrica's chief executive, defended the cuts, arguing pre- payment households were already subsidised. Although Centrica has a legal duty to pass on the cuts, it can decide how it implements the reductions. "We currently charge pre-payment customers less than they cost us. It's an industry-wide problem," responded Mr Gardner.

The Gas Consumers' Council called for an urgent investigation by Ofgas, the industry watchdog and the Government. "We believe this represents a significant worsening of their position," said Sue Slipman, GCC director.

Last night Eastern Natural Gas, one of the largest independent suppliers, said the reductions had been implemented unfairly by Centrica. Jim Whelan, Eastern's managing director, said: "I would have thought it would have applied to all customers. These cuts are not the result of competitive pressure."

About pounds 14 of the pounds 28 saving came from the reduction in pipeline charges, following Transco's defeat at the hands of the Monopolies and Mergers Commission.

Centrica yesterday unveiled losses of pounds 216m for the first six months of the year, up from losses of pounds 53m during the same period in 1996. The figures included a pounds 192m charge to cover the windfall utility tax and a pounds 75m reduction in earnings due to the warm spring weather.