Price war has broken out among Gas and electricity firms

A huge price war has broken out among Gas and electricity firms across the UK, which is sending energy bills to less than £1,000 for the first time in over seven years.

A small independent supplier known as First Utility has launched the UK’s lowest one year tariff covering both gas and electricity, marginally undercutting a smaller rival known as Ovo which lowered its tariff’s to less than £1,000 last week.

This has raised a few eyebrows given the uncertainty of the gas market as a result of the unrest in Ukraine. Many analysts believe that this shows evidence that small rivals can now compete successfully with the bigger energy suppliers.

At £994 a year based on Ofgem's average medium consumption, First Utility's new iSave Fixed July 2015 tariff puts it top of the switching site comparison charts at the moment.

Last week Ovo launched what was then the first duel fuel tariff to break through the £1,000 barrier for the first time in years. Its Cheaper Energy Fixed tariff will cost an average household £998 a year, bucking the trend that has seen average bills move up to £1,264 a year.

Currently, the smaller firms First Utility, Ovo, Spark and Flow Energy all occupy the top spots for offering the lowest tariffs, leading some experts to warn the independent firms are now a force to be reckoned with.

Households can typically save £200 a year by moving from an averagely priced tariff to the very cheapest dealson offer.

Clare Francis, of comparison website MoneySuperMarket said: "The move is another boost to cash strapped bill payers and is a welcome addition to the David and Goliath price war we have seen kick off recently. We are anticipating a lot of activity in the energy market over the next month with a number of fixed rate tariffs ending in the coming weeks. Because of this, thousands of people will, or should be, shopping around for a new deal and the launch of First Utility's new offering is a clear indication that they're trying to tempt the switchers their way."

Ed Kamm, Chief Customer Officer of First Utility, which now has almost 400,000 customers in the UK said this was clear evidence there is active competition within the market. "It will be interesting to see if the larger suppliers choose to get involved."