British Gas, Britain’s largest energy supplier, will reduce household gas prices by an average 5 percent from Aug. 27, it said on Wednesday, taking advantage of a fall in wholesale costs to cut tariffs sooner than its biggest rivals.
The announcement was made a week after Britain’s Competition and Markets Authority (CMA) said energy customers were overcharged around 1.2 billion pounds ($1.9 billion) a year until 2013.
It also comes as British Gas owner Centrica prepares to reveal a new business strategy formed under the leadership of recently-appointed Chief Executive Iain Conn.
Britain’s largest six energy suppliers typically all adjust their tariffs around the same time. British Gas’s rivals are expected to follow suit. They are E.ON, RWE npower s, SSE, Scottish Power and EDF Energy .
“The timing is interesting as it comes just a week after the CMA announced its preliminary findings in its energy market investigation and two weeks before Centrica announces the outcome of its strategic review,” said Jefferies utilities analysts.
They said they expected the outcome of the review, due to be announced on July 30, to show a greater focus on its downstream operations, which include British Gas.
The British Gas price cut is the second reduction in gas bills for its customers in six months but electricity prices remain unchanged, said the energy supplier.
In fact, British Gas Managing Director Mark Hodges said he expected the company’s electricity costs, which includes wholesale prices and transmission charges, to rise 4 percent this year.
The average customer’s annual bill will fall by another 35 pounds following the latest cut, bringing the total average gas bill reduction this year to 72 pounds, British Gas said.
“This reduction reflects our lower projected total costs for 2015 and 2016,” said Hodges.
British wholesale gas prices for delivery this winter have declined around 8 percent since the start of the year.
“British Gas has taken a step in the right direction … I urge other energy companies to follow their lead,” said Amber Rudd, Britain’s secretary of state for energy and climate change.
($1 = 0.6397 pounds)