British Gas bills to rise by 35%

24 July 2008

British Gas customers face paying up to 35% more for the energy bills this winter after the utility giant confirmed prices are going up.

The blow comes just one week after EDF Energy told its gas customers that their bills were rising by 22% while electricity bills were increasing by 17%.

This is the second round of price hikes this year, after the top energy suppliers all hiked prices in January and February.

British Gas says prices for dual fuel will increase by 25%, while prices for electricity customers will increase by 9% and gas customers by 35%.

Unsurprisingly, it blames the price hikes on the cost of crude oil, estimating that this will cost it 89% more this winter than the same season last year.

Phil Bentley, managing director of British Gas, said: "We very much regret that we have had to make this decision at a time when many household budgets are already under pressure.

“The simple fact though, is that we have entered an era of unprecedented high world energy prices. The only answer to cope with higher energy prices.”

Not alone

EDF Energy also blames its price hike on record crude oil costs. A typical EDF customer on a dual fuel tariff will now pay £3.97 a week more.

Eva Eisenschimmel, chief operating officer of EDF Energy Customers Branch, says: “Record world oil prices have continued to drive up wholesale gas prices. Alongside unprecedented rises in wholesale coal and electricity costs, this has impacted hugely on the cost of supplying energy to our customers.

"We have been absorbing some of these costs in recent months, but we now have to pass on some of the resulting rise in wholesale costs to our customers. While the rise in wholesale prices is out of our control, we have been doing everything possible to keep our own costs in check.”

She admits that, in this “difficult economic climate”, the firm is very concerned about the impact of these prices rises on its 5.5 million customers, especially those on low incomes.

Customers of EDF and British Gas are unlikely to be the only impacted by price rises. Scottish and Southern Energy (SSE) has already admitted it may have to put up prices, and British Gas recently forecast that energy bills could hit £1,000 a year over the next 24 months..

SSE, which has more than nine million customers, made the warning in its financial results, which reveal it is on track to deliver an increase in profit of around 4% this year. Despite this growth, it warns that the “extremely volatile” wholesale gas and electricity markets may continue - making energy bill hikes increasingly likely.

Ian Marchant, chief executive of SSE, says: “The extent of the energy shock with which the entire global economy is having to contend has been well-documented, and its full impact on prices for electricity and gas in the UK has still to be felt.

“We are continuing to resist the pressure to put up prices for domestic customers, but doing so is becoming more difficult by the day.”

In response to the warning from British Gas, Graham Kerr, of consumer watchdog energywatch, said: "Gas bills in Britain have doubled over the last few years and electricity bills aren't far behind. Further large scale increases will be catastrophic for British consumers, British businesses and the wider economy."

Experts say consumers should not expect falling crude oil costs to equal lower bills. Joe Malinowski, says: “Although consumers will fail to see how [EDF's announcement] can be anything other than bad news for them, the reality is that it could have been a whole lot worse. Even after this increase, we can expect another £200 on energy bills in the winter of 2009 unless wholesale energy prices come down dramatically.”

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Fuel poverty

Meanwhile, the energy regulator Ofgem has told gas and electricity suppliers they must do more to help fuel poor customers (those households that spend more than a tenth of their income on energy).

It has produced a series of guidelines on the types of initiatives that suppliers can include within their social spending commitments, including a crackdown on the definition of social tariffs for poorer customers.

It now stipulates that for a supplier’s social tariff to be included within their social spend commitments it must be as good as the lowest tariff they offer to customers in that area, including online deals. Previously, social tariffs had to be at least as good as the suppliers direct debit tariff, even thought this might not have been the cheapest deal offered by a supplier.

Following the 2008 Budget, energy suppliers agreed to increase their collective social programmes by £225 million by 2011.

Sarah Harrison, managing director for corporate affairs at Ofgem, says the changes mean customers who struggle to pay their energy bills can be confident that they are on the best deal their supplier offers in their area.

“This move also gives consumer advisers more confidence to recommend social tariffs,” she adds.

However, Ofgem says that some consumers may be able to cut their bills even more by switching to another supplier.

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