British Gas today revealed plans to cut its gas prices by 5% following a drop in wholesale prices.
The UK utility, owned by Centrica (LON:CNA), said the price cut will take effect at the end of August and nearly 7mln customers will benefit.
It marks the second price drop by the company this year and, according to Centrica, customers will save an average of £72. Electricity tariffs remain unchanged.
The market price for wholesale gas is down around 25% in the past six months, as prices caught up with the crude oil decline.
Energy providers have previously come under fire for passing on higher wholesale prices to consumers as they were rising but being too slow to reverse the trend once market prices were in decline.
Centrica’s apparently benevolent move follows a Competition and Markets Authority (CMA) report last week that concluded energy suppliers should be forced to cap their most expensive tariffs until it becomes easier for customers to switch suppliers.
Price competition should be a key priority and customers ought to be encouraged to shop around, according to the watchdog.
British Gas has denied today’s price cut is a response to the CMA report, rather it says the timing is a coincidence.
City analysts, meanwhile, don’t expect to see any further dents in Centrica’s profits due to the price drop as they believe it represents merely a passing on of savings from wholesale, and it is also highlighted that internal margin forecasts have already been downgraded at British Gas.
The CMA’s 12-month inquiry found that consumers could save £160 per year on a standard dual fuel bill of £1,200 per year by switching their supplier.
The report stopped short of recommending a break-up of the ‘big six’ power groups, into their separate supply and distribution businesses, saying vertical integration has not hindered competition.
Rather, a lack of awareness of what deals are available, confusing and inaccurate bills and the real and perceived difficulties of changing suppliers all deter competition switching by consumers.