Consumer groups have welcomed the first British Gas domestic price cuts in seven years and called on other energy firms to follow suit.
The energy giant will cut its standard tariffs for gas by 17% and electricity by 11% from March 12.
It will bring the average annual dual fuel bill for British Gas customers down by £167 to £953, the firm said.
It is the first major power supplier to bring down prices in light of falling wholesale gas prices. Consumer watchdog energywatch said the move was good news for householders.
The watchdog's director of campaigns Adam Scorer said: "Consumers have been desperate for prices to start dropping and this represents what energywatch believes must be the first strike in a battle by all energy companies to lower prices and fight to attract new customers."
Rival energy supplier Powergen responded to the British Gas announcement by pledging to cut domestic energy prices in the near future.
Scottish & Southern Energy, which operates brands including Southern Electric, recently told its customers that it expected to cut its prices.
Help the Aged director of communications Steve Jones said the British Gas price cuts were good news for pensioners.
"We are delighted to see British Gas lowering prices. This will be particularly welcomed by vulnerable older customers living on fixed incomes," he said.
British Gas has increased gas prices on seven occasions since 2002, with electricity tariffs rising six times. It last cut prices in spring 2000. Its parent company Centrica said the cuts were the result of average wholesale gas prices falling by nearly 50% since last year.
