British Gas is to cut household gas prices by 5% following recent falls in wholesale prices – but the cut was described as too little, too late by Ed Miliband.

The firm, which is the second of the big six energy companies to react to falling wholesale prices, said the average household bill would fall by £37 a year for customers on its standard and Fix & Fall tariffs. However, unlike its rival E.ON, which last week announced an immediate 3.5% price drop, British Gas said its reduction would not come into effect until 27 February.

Energy firms have been under pressure to cut prices after a sharp fall in the cost of oil reduced their wholesale costs, with George Osborne saying recently that companies should ensure the benefits were passed on to consumers. Research by price comparison website TheEnergyShop.com has suggested that if falls in wholesale gas and electricity prices since the summer had been passed on in full, consumers would have seen a £140 fall in annual bills.

Miliband, who had previously threatened energy firms with a price freeze if Labour were elected to government, said British Gas’s 5% price fall was “too little, too late when we’ve seen wholesale prices fall by 20%”.

Facebook Twitter Pinterest The corporate affairs director of British Gas, Christine McGourty, said a 5% cut in household gas prices would lead to a £37 reduction off the average annual bill.

Consumer groups agreed. Gillian Guy, the chief executive of Citizens Advice, said the savings being offered were disappointingly low. She added: “Energy bills have risen by a third since 2010 yet figures show wholesale costs are at a four-year low. If energy companies can reduce gas bills, they must also be able to pass on wholesale savings by cutting electricity costs.”

The executive director of Which?, Richard Lloyd, said the ongoing Competition and Markets Authority investigation into the sector “must look at whether falling wholesale energy costs are passed on fairly, or whether a lack of competition leaves us all out of pocket.”

However, David Cameron welcomed the move. He told ITV: “This is excellent news and we should be absolutely clear that this price cut would not be happening if we’d listened to Labour and put in place their 20-month price freeze.”

British Gas said most of the gas being used in customers’ homes had been bought at higher 2013/14 prices, but it was passing the falling costs it was seeing now onto consumers. A spokesman said that the end of February was the earliest that British Gas could pass on a “meaningful cut” to its customers. The firm added that wholesale prices were volatile and it would be keeping prices under review for further movements up or down.

Iain Conn, the chief executive of British Gas’s parent firm Centrica, said: “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.”

British Gas would not quote a current average for customers’ bills. In 2013 the average annual cost of gas and electricity was £1,253, but a mild winter and the removal of green subsidies in early 2014 are thought to have brought this down by around £100.

British Gas said customers who were on fixed tariffs and would not benefit from the fall were able to switch tariffs without paying an exit fee.