British Gas increasing electricity and gas prices

Millions of British Gas customers to see increase in power bills

British Gas customers face higher utility bills after the company said it is putting up the prices of gas and electricity.

Gas prices will rise by an average of 18 per cent and electricity bills by an average of 16 per cent. The increases, which will come into effect from August 18, will see the average dual fuel energy bill rise by £190 a year.

British Gas said it had raised its prices in response to a 30 per cent hike in wholesale prices since last winter.

It is the second of the “big six” companies to put up prices after Scottish Power announced a 19 per cent hike in gas prices and 10 per cent hike in electricity last month. Other companies are expected to follow.

The change in prices will directly affect nine million customers while a further million have fixed prices and will not be immediately impacted.

British Gas last hiked its prices in December when household bills increased by an average of seven per cent, adding £1.50 to the average weekly dual fuel bill.

Managing director Phil Bentley said: “We know there is never a good time to raise prices but we are buying in a global energy market and have to pay the market rate.

“Rising wholesale costs is an issue facing all energy suppliers. Our advice to customers is to wait and see what happens in the energy retail market before making any decisions about switching supplier.”

The company said it “cannot continue to make a loss on the energy it sells” and it needs to make a profit to invest in future energy sources. It offered numerous ways for its customers to keep their prices down, including fixing their bills or improving insulation in their homes and energy monitors.

British Gas said some bills could increase by as much as 24 per cent depending on how customers pay their bills and where they live. The minimum increase will be 12 per cent.

Mike O’Connor, chief executive of Consumer Focus, said wholesale prices have gone up but are still a third lower than their peak in 2008. He has calculated that in this time British Gas prices have risen by around 44 per cent on gas and 21 per cent on electricity and “suppliers have made healthy profits”.

He added: “This price rise will send a shockwave across the country. The impact on customers will be severe, piling more pressure on severely stretched household budgets and pushing hundreds of thousands more households into fuel poverty.

“Consumers simply don’t trust that energy companies have customers’ interests at heart and rightly question whether prices are fair.”

The latest price rises will cause more misery for cash-strapped households, which are struggling as wages fail to keep pace with rising inflation. All of the big six companies hiked prices over the winter.

The Bank of England earlier this year said it expected bills to rise by 15 per cent as part of its forecasts that inflation will hit five per cent this year.

But the two companies to have brought in hikes so far have increased prices at a greater rate than the Bank forecast, raising the possibility that inflation will climb even higher.

Richard Lloyd, executive director of consumer campaigner Which?, said: “Many people are already having to cut back on essentials because of the rising cost of living, and with energy bills rising further, this could be a cold winter for many.”

Energy regulator Ofgem recently called for the industry to be overhauled after it found that the “big six” companies had put up prices more quickly than they reduced them when costs fell. It accused them of “failing to play it straight” with consumers and threatened to refer them to the Competition Commission if they failed to simplify prices. It also called for them to sell off between 10 per cent and 20 per cent of their electricity output to allow smaller firms to enter the market.

Ofgem has also ordered energy companies to give its customers a minimum of 30 days’ notice before putting bills up.

A separate inquiry has been launched into Scottish Power’s pricing plans.

Consumer Focus has called for a review of the energy market, including an end to complex tariffs and moves to improve transparency so the regulator can judge whether consumer bills are fair.

Meanwhile, energy and climate change secretary Chris Huhne said Britain needs to invest in alternative forms of energy to make it less reliant on the fluctuating prices of fossil fuels.

He added: “Only radical reform now will give us the best chance in the long run of keeping the lights on at a price that doesn't wreck our economy over and over again.”

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