The UK’s biggest gas supplier said it will shave £37 from the price of the average annual gas bill despite the heightened political risk posed by the May General Election, and continued volatility in global energy markets.
“We bear the responsibility of managing the risks of buying energy ahead on behalf of our customers, who value the predictability this brings,” said Centrica chief executive Ian Conn.
“Taking this decision now, at a time of continuing uncertainty, shows our absolute commitment to pricing competitively, with customers at the forefront of our minds,” he said.
In a statement British Gas said that the cut reflects the historic lows on the wholesale gas market.
“Though most of the gas being used in customers’ homes today was bought at higher 2013/14 prices, our wholesale costs for 2015 are now reducing to a level where we can pass this reduction to our customers,” the statement said.
The cut comes following weeks of cross-party political pressure heaped onto the big six to cut prices due to historical lows on the wholesale gas and electricity markets.
Both Labour leader Ed Miliband and Conservative Treasury minister George Osborne warned that the lower costs should be passed through to customers. In addition Labour has pledged to intervene in the big six tariff setting if elected to power in the 7 May General Election.
Labour’s move to fast-track legislation to force price cuts before the election failed in a parliamentary vote last week, but highlighted the energy sector as a key political focal point in the run up to the election.
Energy secretary Ed Davey said the British Gas price is “welcome news”, but added that “customers of other energy companies will be asking when they’re going to see savings passed through”.
Deutsche Bank analyst Martin Brough said the pressure to cut prices would felt particularly by SSE which is the UK’s second largest energy supplier in the UK behind British Gas.
“The move increases pressure on SSE to respond, which could be painful given that SSE bought most of its gas 12 months ago,” Brough said.
Davey added that the best way for consumers to ensure that they receive affordable energy is to switch supplier.
“The biggest savings can be made by switching to a better tariff, with many saving around £300 – or even more,” he said.