Price controls to bring cost of gas down next year

Gas and water bills will decrease next year for millions of households, in new price controls announced yesterday by industry regulators.

Gas and water bills will decrease next year for millions of households, in new price controls announced yesterday by industry regulators.

Ian Byatt, the head of Ofwat, confirmed that domestic water charges would come down by 12 per cent from next April - a saving of £30 for the average household. Meanwhile Callum McCarthy, the energy regulator, proposed a £14 cut in gas bills for 10 million British Gas customers.

Consumer groups said that even after water charges are reduced, customers will still be left paying too much. But the industry group, Water UK, described it as a "tough settlement" and said some individual companies were likely to appeal to the Competition Commission.

The reduction in water bills is part of a £1.2bn package of measures aimed at saving customers money and improving the quality of drinking water and beaches over the next five years.

Mr Byatt said that the bill reductions, coupled with an increased £9.4bn programme of environmental spending, was worth an average of £60 for 20 million households.

The actual size of the reductions next April will vary from region to region, with customers of Northumbrian Water enjoying the biggest cut in bills, of about £46.

The only water supplier whose bills will rise over the next five years is Folkestone and Dover, where water charges will rise by £9 to £126 in 2004-05, but sewage charges will come down.

Lord De Ramsey, chairman of the Environment Agency, said the increased environmental programme would put an end to raw sewage on beaches, cleanse rivers and give better protection to rivers and wetlands.

Pete Bowler of the pressure group Water Watch, said: "Mr Byatt is only giving back to customers a small part of the money they have been overcharged in the last five to ten years."

But Pamela Taylor, chief executive of Water UK, accused the regulator of a "short-term fix" which could put public health and the environment at risk.

The reduction in gas bills will only apply to those British Gas customers on standard, pre-payment or prompt-payment tariffs - about two-thirds of its 15 million customers. The remaining five million customers, who pay by direct debit, will receive no price cut as there is already fierce competition for their custom, and they currently receive 10 per cent discounts on British Gas's standard tariff.

The price control will take effect next April but will only last one year, after which the plan is to leave pricing entirely to the market. More than a quarter of British Gas customers have switched to other suppliers in the last month, and the company is losing business at the rate of 32,000 households a week.