E.ON breaks ranks to cut UK domestic gas price by 5 pct

(Adds comment from Ofgem)

By Nina Chestney

LONDON, Jan 20 (Reuters) - E.ON became the first big British energy supplier to announce household winter gas price cuts on Wednesday after a fall in wholesale prices, putting pressure on rivals to follow suit.

E.ON said it would cut its standard residential gas price by an average of 5.1 percent from Feb. 1. That is equivalent to three weeks' gas use, or 32 pounds ($45) off an average annual gas bill.

Wholesale gas prices are trading around their lowest levels since 2009 due to an over-supplied market, above-average winter temperatures which have dampened demand and falling commodity prices.

Pressure has been mounting on the UK's 'big six' energy suppliers - SSE (LSE: SSE.L - news) , Iberdrola (Amsterdam: ID6.AS - news) 's Scottish Power, Centrica (LSE: CNA.L - news) , RWE (Xetra: 703712 - news) npower, E.ON and EDF Energy - to cut prices to consumers but the last reduction in retail gas prices was made last August by Centrica's British Gas arm.

Last winter, E.ON was also first to cut gas prices with a 3.5 percent reduction in January 2015.

The UK's Competition and Market Authority is expected to report its findings from an investigation into the largest energy suppliers at the end of this month.

UK energy regulator Ofgem said E.ON's price reduction was a "step in the right direction".

"We have consistently called on suppliers to explain why retail prices are not falling and this price cut goes some way towards addressing that challenge," Ofgem Chief Executive Dermot Nolan said in a statement.

Around half of the average British household energy bill is based on market prices for electricity and gas, while the rest is composed of, among other things, distribution costs and subsidies for vulnerable customers and for renewable energy production.

"While the price we pay for our customers' energy has fallen, we also have to take account of managing the various other risks in the market which can change, and the fact that many of the other costs that we don't control but do have to bear have increased or may increase," Tony Cocker, chief executive of E.ON UK, said in a statement.

These factors were taken into account in the cut E.ON announced today, he said.

E.ON also launched a new price which it says is the cheapest available energy tariff in Britain - a one-year dual-fuel fixed-price product available to new or existing customers.

It (Other OTC: ITGL - news) also launched two new versions of other dual-fuel tariffs which are now priced lower than previously.

($1 = 0.7069 pounds) (Editing by Greg Mahlich and Jason Neely)