British Gas owner announces price hike

03-08-2006

British Gas owner Centrica has announced plans to raise its household energy bills for the second time this year.

The company said that the average cost of domestic gas bills would rise by 12.4 per cent from September 4th, while electricity bills would also rise by 9.4 per cent.

The UK's largest energy supplier stressed that it had "no alternative" but to increase prices following a 266 per cent increase in the wholesale cost of gas in the period between the winter of 2002/03 and this year's forthcoming cold season.

Centrica added that the move had also been made against the backdrop of a £143 million loss recorded by British Gas' residential energy business in the first half of 2006. This year's drop in profits follows a similar loss of £75 million recorded in the second half of 2005.

Commenting, British Gas managing director Mark Clare said: "Despite being on target to take £200 million of costs out of British Gas' residential energy business by the end of 2007, it's a stark reflection of the market that our losses have doubled.

"Without a price rise these losses would deepen further. This is unsustainable."

"Were it to continue we would not be able to invest in the new supplies necessary to reverse this spiral of increasing wholesale costs," he added.

Mr Clare said British Gas was also prepared to "put our money where our mouth is" by offering a guaranteed fall in prices for customers who receive both gas and electricity supplies from the firm.

Under the company's 'fix and fall' package, launched today, British Gas' dual-fuel customers will be able to fix their new energy prices for 12 months and then benefit from a five per cent drop in prices at the end of 2007.

British Gas has announced the new package based on the belief that wholesale energy costs will soon fall based on new infrastructure that is now coming into operation.

Responding to today's price hike, Edward Davey, trade and industry secretary for the Liberal Democrats, said: "If gas and electricity prices continue to rocket, this winter's fuel bills will be the most expensive on record. Higher fuel bills will spell misery for millions, especially in Britain's poorest homes.

"As the government has been slow to help solve the gas supply problems behind these hikes, they must spend the summer making up for lost time."

Meanwhile, Tony Herbert of charity Citizens Advice commented: "This is the latest in a series of price increase hitting people on low incomes. We're starting to see evidence of people struggling to pay their gas and electricity bills but we expect that this will grow massively over the winter months."


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