British Gas steps up energy price war

British Gas steps up energy price war

The PR battle to be seen as the cheapest domestic energy supplier intensified today when British Gas surreptitiously reduced prices for the second time in eight days.

The Centrica-owned company made no formal announcement, but instead quietly informed the switching industry that it was lowering prices for customers who manage their accounts online.

Industry observers said British Gas's move, which only cut its Click energy tariff by a few pounds a month, was clearly designed to undermine an earlier announcement by rival Powergen.

On Thursday, the Eon-owned company, introduced four new products ahead of a wider price cut, including one tariff that was guaranteed to be cheaper than British Gas.

A spokeswoman for British Gas played down Friday's move, and claimed it was "simply an extension of its earlier announcement" that will see its customer's gas and electricity bills fall by 17% and 12% - from March 12.

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"This (further) reduction means our Click 2 tariff is clearly the cheapest on the market," she said.

Powergen has admitted its move was part of its battle to win the PR war currently going on between suppliers.

"We said on the day that British Gas announced its new lower tariffs that we would be dropping our prices. This week's deals were part of that process. We want consumers to know that we are serious about price cutting - we will be cutting our overall prices shortly," said a spokesman.

Geoff Slaughter, energy product manager at uSwitch.com said: "British Gas has highlighted the fundamental flaw in rival Powergen's guarantee of being cheaper. The guarantee had only applied to British Gas' standard tariff, - today's manoeuvre renders the guarantee worthless - something I'm sure British Gas had considered."

Paul Green, CEO at energyhelpline.com, said it's clear that a price war is breaking out among suppliers keen to be seen as cheapest.

"This is a tit-for-tat retaliation to Powergen's price drops. British Gas has reduced prices again - an unprecedented two price reductions in one week. After six years of price increases, British Gas last week turned the tables on it competitors by being the first supplier to announce price cuts. The other major suppliers to follow suit within the next couple of weeks," he said.

The move is also a clear admission by British Gas that its strategy of charging the highest prices in the market has failed. The company, which lost 2.7m accounts over the last three years, has spent a great deal in the last week advertising the fact that it is currently the cheapest supplier.

However, its executives face an anxious wait to see what price reductions the other five big energy suppliers can come up with.

Rivals Npower, Scottish & Southern, and Scottish Power have all said they will be reducing prices in the next few weeks. Analysts are predicting some as soon as early as next week. The price reductions are the direct result of falls in wholesale gas prices which have halved since April 2006.

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