British Gas hammers cash-strapped households with huge 18% increase in fuel prices for the second time this year

Published 08th Jul 2011

* British Gas admits some bills could increase by as much as 24%
* Energy giant said prices upped in response to a 30% hike in wholesale prices since last winter
* They are second of the 'big six' firms to put up prices after ScottishPower announced a 19% gas hike



Millions of British Gas customers were left reeling today as the energy giant added huge increases to the price of domestic gas and electricity, piling more misery onto households.

The 9million British Gas customers affected by the rise could face paying nearly £200 more for energy in the second price hike this year.

It comes just days after energy watchdog Ofgem announced it is launching an investigation into pricing practices after it emerged that movements in household bill rates bear little relation to the wholesale costs paid by the firms.

While gas prices with the energy giant will hit 18per cent electricity costs will go up by 16 per cent.

The energy firm last raised its prices in December by 6.9 per cent, or £43, for gas and 6.7 per cent, or £28, for electricity.

They have admitted that the latest round of price increases could see some customerspaying up to 24 per cent more dependent on where they live and how they pay their bills.

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% on gas and 21% 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.

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 5 per cent this year.
Doorstep sales axed

Up to 900 jobs will be axed at Scottish and Southern Energy (SSE) after the company announced today it was immediately suspending all its doorsteps sales.

The decision to abandon old-fashioned door-to-door selling follows a breakdown in confidence in the practice among consumers, the energy giant said.

It also comes two months after the company was found guilty of using doorstep salesmen to mislead potential customers in a case brought against it by Surrey County Council.

Commission-based doorstep selling has ceased to be an effective way to gain customers for the long term, the firm said, adding that it expected to permanently close its doorstep sales operations.

Since household gas and electricity supply markets opened up to competition in the 1990s, doorstep, telephone, online, venue and partnership sales have been used by leading energy companies to encourage customers to change their supplier of electricity and gas.

In 2010-11, about 45% of SSE's total customer gains in Britain came from doorstep sales, the company said. The rest came from telephone, venue, online, direct mail and partnership sales, which will all continue.

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.'

With this latest hike the average household bill for a dual fuel British Gas customer will now go up to from £1,096 to £1,288 – an increase of £192.

Consumers last saw a year of double price hikes in 2008 when energy bills rocketed by £334 or 41 per cent.

And consumer experts predict no household will be safe in these price increases as other energy suppliers look set to follow suit.

Ofgem has brought in accountants to examine the big six energy companies books after figures revealed a massive gap between wholesale prices and consumer rates.

Suppliers regularly use rising wholesale prices as an excuse when they raise gas and electricity bills for customers – but rarely bring bills down by the same amount when costs fall.

The watchdog's move will raise suspicion that the big six could be involved in informal cartel-like behaviour: raising, and less often, lowering prices en masse to leave customers with little choice while maintaining profits in the sector.

Energy firms are required to provide Ofgem with information on how much they pay for wholesale energy.

This data has revealed that there is as much as 27 per cent difference in how much each energy firm pays for gas and a 15 per cent difference on electricity.

Centrica, which owns British Gas, paid an average £53.7 per megawatt-hour for electricity, compared with £68.3 that ScottishPower paid.

On gas, ScottishPower paid an average price of 59p per therm, while EDF spent 51.3p per therm last year - a difference of 15 per cent.

Scottish and Southern Energy are not required to publish their 2010/11 results until the end of September 2011, so they are not included in the data.

Ann Robinson, director of consumer policy at uSwitch.com, said: ‘We are straying into deeply worrying ‘double price hike’ territory. It now looks as though households are on track to see their energy bills increase by £182 or 16 per cent this year.’

‘We are straying into deeply worrying ‘double price hike’ territory. It now looks as though households are on track to see their energy bills increase by £182 or 16 per cent this year.’

Ann Robinson
Director of uSwitch.com

‘The impact on family budgets will be huge, but it will be particularly hard on those living on fixed incomes and I would urge both suppliers and the Government to start thinking now of how they can provide some support. It may seem a long way ahead, but winter will be coming too quickly for those who cannot afford their fuel bills.’

British Gas have blamed the price rise on 'higher global demand for gas, driven by increased consumption in Asia and the impact on supply of unrest in the Middle East and North Africa.'

Last month month energy regulator, Ofgem, confirmed that wholesale energy prices have risen by 30 per cent since December.

British Gas 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.'

The rise will come as no surprise to customers after British Gas hinted at a price increase last week for the second time, blaming higher wholesale prices.

But it is likely to cause anger among struggling households and critics who accuse the energy giants of forcing through price rises with the excuse that wholesale costs are pushing up energy bills.

Source: ' ThisIsMoney '

View All Latest News