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British Gas first to announce gas price cuts for 7.5m homes

British Gas today announced it will cut gas prices by 10% from 19 February 2009. The reduction will apply to all customers on British Gas' standard tariff, benefiting more than 7.5million homes.

The price cut, which will save customers £84 on the average annual household gas bill, is the first standard gas tariff cut by a major energy supplier since 2007.

Managing Director, Phil Bentley, said: "We're very pleased to be able to announce this price cut for our gas customers. At British Gas we understand energy bills are a significant cost and we are committed to providing the best possible prices for customers. This price cut will go some way to helping customers manage their budgets, and we will continue to do what we can, when we can."

Over the last 12 months, the wholesale market has experienced unprecedented volatility. In 2008 the wholesale price almost doubled, but British Gas protected its customers from the full impact of this increase by buying wholesale gas in advance.

Mr Bentley explained: "Demand for gas is four times higher in winter than in summer. We buy gas months before it is used so we can make sure we always have enough for our customers, and can protect them from sudden rises in wholesale prices. The recent dispute between Russia and Ukraine demonstrates how important it is that we continue to do so, as it caused a sharp rise in wholesale prices which had fallen from last year's peaks."

On 19 February, British Gas will also introduce a ‘prompt payment discount' of up to £15 per year for customers on standard gas tariffs who pay quarterly. For those standard tariff customers paying by direct debit, British Gas will automatically reduce their payments by 10% when the price cuts take effect.

These changes come on top of a recent price reduction for British Gas' pre-payment customers and improved information about the company's online product - making British Gas the first energy supplier to meet Ofgem's key requirements following its recent probe into the UK energy market.

Energy efficiency - further savings

Announcing the 10% price cut, British Gas also highlighted the importance of energy efficiency in helping customers reduce the amount of energy they use and save money. Because of rising energy prices and the tough economic climate, the company has seen a huge increase in demand from its customers for expert advice on using less energy - particularly through its website: www.britishgas.co.uk.

Mr Bentley confirmed: "More than two million customers have filled out an Energy Savers Report, and through our advice we have shown how households can save, on average, £175 per year on their energy bills. While we expect gas markets to remain volatile, we strongly recommend customers take control of the amount of energy they use, and we're keen to help them do this."

As well as offering expert energy-saving advice, British Gas is expected to spend more than £1 billion by 2011 to subsidise the installation of energy efficient products in customers' homes. This includes the use of insulation, which can reduce energy bills by up to £365 per year.

-end-

Notes to Editors:

1. The average percentage real-term savings, based on average annual consumption of 20,500kwh, are a rounded average across all regions and across the monthly direct debit, pay as you go energy, and prompt quarterly cash or cheque methods of payment on our standard tariff prices

2. The ‘prompt pay discount' will apply to both gas and electricity customers - which means that dual fuel customers will benefit from a total discount of £30

3. Households that followed the advice in their British Gas' Energy Savers Report have achieved annual savings of, on average, £175. Recommended measures include draught proofing and installing energy saving lightbulbs. The figure of £175 is based on Energy Savers Report data June 2006 to October 2007

4. Home insulation can achieve annual savings of £365 according to research by the Energy Saving Trust in October 2008, based on a gas-heated three-bedroom semi-detached property with average levels of existing insulation. Consumption of a three-bedroom semi-detached house is based on typical industry average consumption, assessed by DECC as being 18,241 kWh gas and 4013 KWh electricity. Individual savings may vary depending on type and age of home. Not all homes are suitable for additional insulation. When ‘updating' existing insulation, savings will be reduced. Actual savings depend on individual circumstances

5. Standard tariff customers paying by direct debit, whose accounts have been reassessed since July 2008, will see their monthly instalments reduce by 10% in March

6. British Gas remains committed to its 28,000 UK employees, to creating new jobs in this country where it can, and to looking after its 16 million customers - providing them with competitive prices, and keeping their homes warm and working

7. The price cuts come as the company confirmed its intention to invest around £1 billion every year on new sources of gas and electricity to meet the UK's future energy needs, alongside its proposal to commit £3 billion to the future of the UK's nuclear industry. British Gas has a commitment of around £1 billion by 2011 to subsidise the installation of energy efficient products in customers' homes, and a further £160 million to help its most vulnerable customers - more than any other energy supplier

Contacts:

Media relations British Gas: 0845 072 8002

Centrica Investor Relations: 01753 494 900

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