British Gas to increase energy bills

Centrica-owned British Gas, which serves about 12 million homes, is reportedly preparing to announce as early as today that it is increasing electricity and gas charges by nearly 10 per cent.

The average British Gas annual dual-fuel bill for gas and electricity currently stands at £1,260 – meaning a 5 per cent increase would add £63, while an 8 per cent rise would put on £100.

A British Gas spokesman said: “We do not comment on future pricing movements. We do not comment on speculation about future pricing movements.”

The report comes as rival SSE prepares to increase tariffs by 9 per cent on average on Monday, hitting about five million electricity customers and 3.4 million gas customers.

British Gas raised gas and electricity prices by 18 per cent and 16 per cent respectively in August 2011, blaming higher wholesale costs, but this was followed by a drop of 5 per cent in electricity tariffs in January when prices eased.

The supplier is expected to say it was forced into the move by higher wholesale prices and the rising cost of using the National Grid network.

British Gas warned in May that its costs were rising, with wholesale gas prices 15 per cent higher for the coming winter and other charges set to add around £50 to the cost of supplying the average household this year.

But the division provoked outrage in July after it unveiled a 23 per cent leap in profits, admitting last year’s hefty price rises helped it pull in £345m in operating profits in the first half of the year.

Commenting on speculation that bills were set to increase again, Caroline Flint, Labour’s Shadow Energy And Climate Change Secretary, said people will “not understand why British Gas are putting prices up”.

She said: “Unless Ministers get to grips with spiralling energy bills, people will rightly think that this Government is completely out of touch with families and pensioners struggling to make ends meet.”

Other big suppliers – including EDF, Scottish Power and nPower – are not expected to follow suit and announce higher prices. E.ON is the only supplier to guarantee a price freeze for 2012.

Further utility bill increases will play havoc with the Bank of England’s inflation forecasts, which predicted a gradual slide in the consumer price index rate towards the end of the year and into 2013.

While inflation fell from 5.2 per cent in September last year to 2.5 per cent in August this year, many economists expect the rate to rise again as droughts in the US are likely to mean higher food prices.

Further energy price increases will throw households’ already stretched budgets into “turmoil”, consumer groups warned, urging people to take action to keep their bills down, although some of the cheapest deals on the market have already disappeared.

Many households have already been squeezed by increased mortgage costs after a string of lenders increased their standard variable rates (SVRs) in recent months, affecting more than a million home owners.

Santander’s SVR rise last week meant a few hundred thousand of its customers saw an average increase of £26 a month for a £100,000 mortgage.

A survey published by Consumer Focus last month estimated that about six million households plan to cut back their heating this winter.

Nearly four out of 10 households (39 per cent) are worried about affording their energy bills this winter, and 70 per cent of those, or six million households across England, plan to reduce their heating.