British Gas confirms plan to cut bills by 7%

Published 04th Feb 2010

Centrica, the owner of British Gas, today confirmed that it will reduce the average gas bill by 7 per cent which it claims will save the typical household £55 a year.

Nearly eight million British families are set to benefit from the cut which Centrica said will be rolled out immediately.

Phil Bentley, managing director of British Gas said today: "At British Gas, we know household budgets are stretched, and that our customers are concerned about the effect the recent cold weather will have on their winter fuel bills.

“I’m pleased we’re able to offer our customers some extra help with this gas price cut – and that we’re able to do this while it’s still winter, allowing our customers to really feel the benefit."

The cut follows steep falls in the wholesale price of gas since 2008 and is the first of its kind by one of the UK’s “big six” energy suppliers since 2007. It could open the floodgates to reductions from rivals E.ON, EDF, ScottishPower, Scottish and Southern Energy and RWE npower.

It brings to an end a period of steady increases in bills. In July 2008, the same month in which global oil prices peaked at a record $147 per barrel, British Gas lifted its gas prices by 35 per cent.

But since then the wholesale price of gas in the UK has plummeted, tracking oil which plunged sharply in the autumn of 2008 and hit lows of below $40 per barrel a year ago.

Yesterday, the wholesale gas price was 35p per therm for immediate delivery — about one-third of the level seen in mid-2008.

Industrial demand for gas in the UK has fallen by about 10 per cent since 2007 because of the recession, with factories forced to reduce energy consumption. Meanwhile, supplies to the UK are plentiful, with two new liquefied natural gas (LNG) terminals opened in Milford Haven in South Wales last year. The boost to supply has helped to depress prices further.

The move by British Gas will also help to stave off public criticism of what are expected to be bumper profits of more than £500 million when the group unveils its full-year 2009 profits at the end of this month.

All of Britain’s energy companies have benefited from increased demand for the fuel during an unexpectedly cold December and January.

Citigroup has estimated that Centrica alone enjoyed an extra £40 million to £50 million profit on the back of the cold weather.

Source: ' Times '

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