Eight million face higher power bills as British Gas prices rise

Household bills for gas and electricity will increase by an average of seven per cent from December 10, which will amount to an increase of 1.50 on the average weekly dual-fuel bill. The increases apply to customers on standard and variable tariffs.

The company said rising wholesale prices had forced it to lift the bills, but vowed not to apply the increase to the company's 300,000 most vulnerable customers, such as the poorest pensioners.

The move follows a price rise by utility giant Scottish & Southern at the end of last month. It said it would put up its gas bills by nine per cent from December 1.

Industry regulator Ofgem recently warned that rising prices in the wholesale market – where suppliers buy their energy – could be passed on to the consumer.

British Gas, which is owned by Centrica, said it had witnessed a rise of more than 25 per cent in wholesale gas prices since the spring.

The utility firm said yesterday's increase followed two years of price cuts, meaning its average dual-fuel bills were still lower than in January 2009.

British Gas managing director Phil Bentley said: "We know that rising energy prices come at a difficult time for many in Britain. That's why we are not raising prices for our vulnerable customers, such as the poorest pensioners, until after this winter."

Mr Bentley said customers could keep their bills down by improving the energy efficiency of their homes.

Some 1.6 million customers on fixed price deals will not be affected in any way, British Gas added.

Yesterday's announcement means an average British Gas customer's dual-fuel bill will rise annually from 1,157 to 1,239.

Customers identified as vulnerable will see bills held until April, the firm added.

In addition to a rise in wholesale prices, British Gas said other costs, such as transport and distribution, had increased by six per cent. Mr Bentley said as a result the company had recently been selling gas at a loss, which was "not sustainable".

But lobby group Consumer Focus said wholesale prices were around half their 2008 peak and in the same period customers' prices had fallen by less than 10 per cent.

Its director of external affairs Adam Scorer said: "Consumers will be dismayed by this news. Winter is going to seem that much colder and budgets are going to be that much tighter after this announcement."

British Gas, along with the rest of the industry, will ramp up its spending on infrastructure over the next 10 years to secure supplies to households. The company saw profits nearly double in the first six months of 2010 to 585m after the coldest winter for 30 years.

The national officer for energy for the Unison public sector union, Steve Bloomfield, said it was only a matter of time before the rest of the major energy companies followed suit.

He said: "The British energy market needs an urgent, comprehensive review and overhaul to make sure it is acting in the interest of consumers.

"It cannot be right that companies like Centrica, British Gas's parent company, can make huge profits by selling and producing gas, without passing savings on to British Gas customers."

Pensioner organisation, the National Pensioners Convention (NPC), urged the Government to explain what it intended to do with the winter fuel allowance next year in light of the announcement by British Gas.

NPC general secretary Dot Gibson said: "The Government must tell pensioners as a matter of urgency whether they will be getting their winter fuel allowance next year at the current rate – or whether, as we suspect, Ministers intend to reduce the under-80s payment by 50 and the over-80s payment by 100.

"Up to three million pensioner households are already spending more than 10 per cent of their income on fuel bills, and are living in fuel poverty."