British Gas today became the first major energy supplier in the UK to announce a reduction in its tariffs for residential gas and electricity customers.

From 12 March 2007 British Gas will cut its standard tariffs for gas by 17% and for electricity by 11%. As a result, the average annual dual fuel bill for its customers will fall by £167 to £953.

More than four million people switched their electricity or gas supplier last year in a bid to cut their bills, recent figures from energy regulator Ofgem showed.

Centrica chief executive Sam Laidlaw said British Gas would now be offering the "lowest prices on the street".

However, the move raises expectations that other suppliers might also cut their prices.

Mr Laidlaw defended the decision not to pass on the whole of a 50% drop in wholesale prices to customers. But he pledged that any further falls this year would be reflected in lower bills.

"We don't go and buy our gas purely on a day-to-day spot basis; we go out and have to buy our gas on a long-term basis," he told BBC Radio 4's Today programme.

British Gas is also launching a social tariff, at a cost of £40 million per annum. The ‘Essentials’ tariff will lower gas and electricity bills further still for up to 750,000 customers defined by the government as vulnerable. Prepayment meter customers who qualify for Essentials will see their energy bills drop by 24.6% or £285 per annum.