Energy price war hots up as British Gas cuts annual bills by £207

Consumer groups said this would force rival energy firms to follow suit, raising the prospect of a price war.

Watchdogs and MPs have voiced concern because the six major power companies - British Gas, Powergen, nPower, Scottish & Southern Energy, EDF and Scottish Power - were slow to pass on a 50 per cent cut in wholesale prices to customers.

Regulator Ofgem criticised EDF and Scottish Power this week for failing to cut prices on more than ten million accounts.

Coupled with a cut in March, British Gas's electricity prices have fallen by 17 per cent and gas by 20per cent in the last few weeks.

The reductions have reduced the typical annual bill for a dual-fuel customer by £207 - from £1,120 to £913.

British Gas boasts of attracting 678,000 customers since it started reducing prices.

But this will be offset by a number - revealed later this year - who left during the same period. Adam Scorer, of the consumer group Energywatch, said: "This move should jolt other energy suppliers out of their lethargy. British Gas knows it needs to cut prices to win back customers."

Ofgem chief executive Alistair Buchanan said: "Customers should continue to turn up the heat on suppliers by taking advantage of savings available by switching supplier."

The main reason for the fall in wholesale prices is an increase in the supply available through new pipelines from Norway and the Netherlands.