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Last Updated: Tuesday, 24 August, 2004, 17:38 GMT 18:38 UK
British Gas puts up energy prices
The rise is on top of January's increase of 5.9%
British Gas is putting up its gas and electricity prices for domestic users.

The cost of gas will rise by 12.4% and the cost of electricity will rise by 9.4%, the company said.

The new prices take effect from 20 September and are expected to add an extra 52 a year to a typical gas bill, which is paid quarterly.

The firm blamed the rising cost of wholesale gas, which has risen sharply in the past year, partly as a result of higher crude oil prices.

The new prices are expected to add an average of 24 a year to a typical electricity bill, paid quarterly, or 26 a year for customers who pay by a prepayment meter.

Consumer blow

Consumer group Energywatch has condemned the move.

"This is a body blow to consumers," said Allan Asher, chief executive of the consumer group.

"This price rise is going to add millions to bills and expose many thousands of households to the risk of fuel poverty."

Industry regulator Ofgem urged British Gas customers to change supplier.

Gas paid quarterly: 422 a year to 474 a year
Gas paid by direct debit: 378 a year to 425 a year
Electricity paid quarterly: 257 a year to 281 a year
Electricity paid by direct debit: 245 a year to 268 a year
Prepayment gas: 422 a year to 474 a year
Prepayment electricity: 273 a year to 299 a year
*Average usage and prices include VAT. Source: British Gas

"For British Gas customers there are no prizes for loyalty. Our message to British Gas customers is to shop around and get yourself a better deal," a spokesman told BBC News Online.

There are six major gas and electricity suppliers and a range of smaller suppliers which customers can choose from.

One of its competitors Powergen has already increased its prices twice this year and the other gas and electricity suppliers are expected to follow suit.

Dramatic rises

"Historically what we have noticed is that when British Gas puts up its prices, then the other suppliers tend to follow suit," said Jenny Evans, spokesman for energy comparison website Uswitch.com.

"But while wholesale gas prices have increased dramatically over the last year, these rises are the highest we have seen from any supplier."

British Gas last put up prices for its 6.2 million electricity customers and 18.4 million gas customers in January, when it added an extra 5.9% to customers' bills.

The firm, which controls 60% of the residential gas market and 24% of the domestic electricity market, said it had put aside 10m to protect vulnerable customers who may not be able to absorb the latest price rises. It is not yet clear how this money will be distributed.

British Gas residential reported a profit of 169m in 2003.

British Gas added that customers could save money by switching to direct debit payments as this could cut 50 a year off their annual bill. The rise in prices will encourage gas and electricity suppliers to offer different payment products, such as capped deals.

Rising costs

The latest rise should be seen within the context of record wholesale fuel costs, dwindling North Sea energy reserves and the UK's growing dependence on worldwide energy markets, British Gas said.

"The UK energy industry has never faced such high wholesale gas prices - looking forward the price for 2005 is more than 50% up on 2003 prices," said Mark Clare, the company's managing director.

People are making efforts to reduce the amount of energy they consume
Giles Clinker, London, UK

"We have absorbed as much of these additional costs as we could, but unfortunately we now have to pass a proportion of them on to our customers," he added.

The cost of gas is expected to rise as the North Sea oil reserves peter out and the UK becomes a bigger importer of gas.

UK energy suppliers will then be forced to compete for energy supplies on global markets and will grow increasingly dependent on overseas suppliers.

By 2015, it is forecast that 75% of the UK's gas needs will be imported.

The BBC's Rory Cellan-Jones
"British Gas is pushing through its second price rise this year"

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