Powergen will today wade into the energy price war by cutting bills and guaranteeing to be cheaper than British Gas for at least the next 18 months, The Times has learnt.

Dual-fuel gas and electricity rates will come down by 8 per cent or £79 a year as Powergen tries to stop customers switching to its fierce rival.

But the group faces a backlash over the size of the cut — half that announced by British Gas a week ago — and the fact that it is offering the cheaper prices only on four new products. Most of Powergen’s six million customers will have to switch account to take advantage of the new rates.

The group is refusing to name a date for a wider price cut across all its existing tariffs, reiterating only that a decision will be made “shortly”.

The move will add to the growing controversy over why Britain’s big energy suppliers are taking so long to pass lower wholesale gas and electricity prices on to households.

Wholesale prices for winter delivery stand at 17.4p per therm, against 73.5p per therm at the start of 2006.

Patrick Heren, managing director of the consultants Heren Energy, said suppliers could soon be accused of “milking” high prices to restore margins.

He added that some may be stuck with gas they bought on high-priced hedging contracts a year ago.

British Gas last week announced the first price reductions in the industry for six years — 17 per cent on gas and 11 per cent on electricity. They take effect on March 12.

The cuts will push British Gas’s average dual-fuel bills down by 15 per cent or £167 to £953 a year. Powergen’s new dual-fuel rate will be £926 a year.

A Powergen spokesman last night said the size of the dual-fuel reduction — 8 per cent — should not be seen as “indicative” of the wider price decrease that is coming.

He told The Times: “These products are cheaper than British Gas and will be available immediately. We want to get them into the market quickly to reassure our customers and those considering moving to British Gas that we have lower prices.

“We can do this quickly with these products whilst we final-ise the details of the wider decrease that will be announced shortly.”

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