British Gas has become the second Big Six energy provider to announce price cuts this year, but the drop doesn't take effect until 27 February and the 5% reduction only applies to gas.

Plus, while today's news will shave £37 off the average annual energy bill, customers on standard tariffs can save far more by switching to a better deal. (Join our free Cheap Energy Club to find the cheapest tariff for you.)

The price cut will apply to all customers on British Gas and Sainsbury's Energy's standard gas tariff – including those on a prepayment meter – whether a dual fuel customer or not. Sainsbury's Energy is a sub-brand of British Gas.

Customers on either of the pair's fixed tariffs will not benefit from the price reduction, except for those on British Gas's 'Fix & Fall' tariff (Sainsbury's doesn't offer this type of tariff).

Usually fixed tariffs lock you in at a set price and don't change when a supplier increases or decreases prices, but despite being a fixed price tariff that prevents against price rises, Fix & Fall has a feature that implements price cuts where they're made by British Gas.

British Gas says the move reflects the recent fall in wholesale gas prices. It comes after fellow big six provider E.on last week became the first energy provider to cut its standard energy prices this year. It cut gas prices by 3.5% last week. (See the E.on cuts gas prices MSE News story for more.)

'Most households in the UK are massively overpaying for their energy'

Martin Lewis, founder and editor of, says: "All price cuts are welcome, even if they're just 5% on gas only. Yet the true revelation of this announcement is that it shines a light on the fact that most households in the UK are massively overpaying for their energy.

"While British Gas is cutting its standard price for someone on typical usage to £1,155 per year, you could shift to a new fixed deal and save on average £200 a year more. And, as British Gas's price cut doesn't hit until 27 February, if you start a switch today, you'll probably be on your new tariff before it comes into effect.

"The real concern is that people will see this as a message that ‘everything's fine, my provider has cut prices, things are going to get better' – no, this is wrong, only switchers get the cheapest prices. So do a comparison and see how much you are overpaying.

“The wholesale price of energy has come down by about 20%-30% since the start of 2014, the prices of the cheapest switchers' deals have dropped over 10% yet we've only seen trivial cuts from E.on and British Gas.

"As the big six are like sheep, expect the rest to follow with these small cuts. However I doubt we'll see the big cuts that the drop in wholesale prices warrants before the general election. Most providers are petrified of the potential Labour government's price freeze, so they're worried if they make large cuts now, they'll be locked in, even if wholesale prices rise again. If only Ed Miliband hadn't pre-announced the price freeze it, it would've been a strong policy."

'Our prices are under review for further movements'

British Gas says it is keeping prices "under review for further movements up or down".

Iain Conn, chief executive of British Gas' parent company Centrica, says: "We've been watching the significant moves in the international energy market extremely closely for some time, with the aim of helping customers with a price cut at the earliest possible opportunity. Operating in such a volatile market, no pricing decision is straightforward.

"We bear the responsibility of managing the risks of buying energy ahead on behalf of our customers, who value the predictability this brings. Taking this decision now, at a time of continuing uncertainty, shows our absolute commitment to pricing competitively, with customers at the forefront of our minds."