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Surprise British Gas Cuts Spark Price War Hope

By David Holmes on February 10, 2010

British GasLast week, British Gas made a bold yet popular move to reduce its standard household gas prices by an average of 7%. The cuts have been applied with immediate effect and are thought to benefit approximately 8 million households across Britain. British Gas also suggested the 7% reduction in prices will translate to an average saving of £55 over the year.

The price cuts made by British Gas have come as a surprise to many, as the market conditions are currently such that energy companies are expected to hike up domestic bills rather than reduce them. Factors such as the weakened economy and state plans to implement more renewable energy systems have conspired to produce a bleak outlook so far as domestic energy bills are concerned. Furthermore, a number of industry experts have suggested that Britain is now dependent on foreign gas imports to sustain the country’s energy requirements, as production rates have failed to keep pace with demand.

However, the major energy companies in Britain have attracted considerable criticism from Ofgem, which has argued falling wholesale costs have not always been passed on to consumers. As such, the leading energy companies have secured massive profits during recent years as a result of passing costs but not savings on to consumers. Consequently, the price cuts by British Gas are likely to have surprised many industry experts and rival suppliers, which has led to fresh hopes that a new price war will emerge in an era of increased costs and fuel poverty.

British Gas has sought to remind customers its most recent price drop is the third of its kind within the past 12 months. In a statement to the media, the company said: “At British Gas, we know household budgets are stretched and our customers are concerned about the effect the recent cold weather will have on their winter fuel bills. The latest price cut means, no matter where you live in Britain, British Gas is offering, on average, the cheapest standard gas, electricity and dual fuel prices – beating all other major suppliers”. Nevertheless, Ofgem maintain a 25% rise in domestic energy bills is likely by 2020.