E.On to reduce standard gas price by 3.5%

The move will cut the average annual gas bill by the equivalent of £24

The move is likely to put pressure on Britian's other utilities to follow suit (Getty Images)

E.ON has announced it will cut its standard gas price by an average of 3.5 per cent starting today.

The German-owned firm has become the first of the UK’s Big Six energy suppliers to react to falling wholesale prices.

For its 4.5 million household customers the company’s announcement will reduce the average annual gas bill by the equivalent of £24, or two weeks' gas use.

And the move is likely to put pressure on Britian's other utilities to follow suit.

Wholesale gas prices have fallen on the back of a steep drop in oil prices and British politicians, gearing up for a May election, have urged energy companies to pass on those savings.

Labour party leader Ed Miliband has promised to freeze energy prices if his party is elected in four months' time.

E.ON UK chief executive Tony Cocker said the proposed "price freeze" meant the company was "undoubtedly taking a risk" by cutting tariffs.

Labour wants to give regulator Ofgem the ability to force companies to pass on falls in the price of wholesale oil and gas to consumers, which industry estimates claim could knock £136 off the average bill.

E.ON also launched what it said was the country's cheapest energy tariff, a new one-year fixed dual-fuel product with an average annual price of £923.

Mr Cocker said: "Today's 3.5 per cent cut to our standard gas price and the launch of the UK's cheapest energy tariff, our one-year fixed product, demonstrate that we fundamentally believe in doing the right thing for our customers."

He added: "Given the possibility of a price freeze, we are undoubtedly taking a risk today but we always put our customers first. That was in the forefront of our minds before Christmas when we began the detailed process of delivering today's price cut.

"We have made this decision knowing that our ability to recover costs, should the market outlook change in the months or years ahead, may be limited but we urge all political parties to recognise the realities of the energy industry and help us to continue to do the best for all of our customers."

A 2013 proposal by Miliband to freeze gas and electricity prices for 20 months gave his party a temporary lift in opinion polls. It was criticised by the country's big six energy suppliers and business groups.

Energy UK, a group representing the industry, said on Sunday firms were already passing on savings to consumers and that pricing was a commercial matter for individual companies.

"No new powers are needed," Lawrence Slade, chief executive of Energy UK, said in a statement.

"When people shop around they can easily find deals that are over a hundred pounds cheaper than this time last year and in line with falls in the wholesale energy price part of energy bills."

Chancellor George Osborne last week said it was vital that the lower oil price be passed onto families "at petrol pumps, through utility bills and air fares". Chief Secretary to the Treasury Danny Alexander has made similar comments.

Additional reporting by agencies