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Last Updated: Friday, 17 February 2006, 15:28 GMT
British Gas raises prices by 22%
Wholesale gas prices have risen sharply
Gas companies have started passing on higher costs to consumers
Millions of British Gas customers are facing higher bills after the firm raised its gas and electricity prices.

The UK's biggest energy supplier will raise gas and electricity tariffs by 22% from 1 March 2006.

The firm blamed the increase on substantial rises in wholesale prices, up more than 70% since September.

On Thursday, the European Commission said some European energy firms were holding back gas supplies, driving up prices of imports into the UK.

In the past few days, both EDF Energy and Scottish Power also have raised their prices.

News of British Gas's move prompted consumer groups to voice concerns about the effects of the increases.

Bleak day

Energywatch called it the bleakest day yet for energy consumers in Britain, while Age Concern said older people needed extra protection from fuel poverty.

"An extra 200,000 older people are pushed into fuel poverty when a 10% increase occurs, so this particular price rise will have a wide effect on vulnerable pensioners," said Mervyn Kohler, a spokesman for Help the Aged.

Even after these increases, British Gas continues to shoulder a portion of the burden these higher wholesale costs
British Gas

British Gas defended its decision to boost prices, saying that UK consumers still pay substantially less than their peers in Germany, France and Italy.

"Even after these increases, British Gas continues to shoulder a portion of the burden of these higher wholesale costs," it explained.

It also said it would provide a 'Winter Rebate' of 90 to 300,000 of its most vulnerable customers.

British Gas said that wholesale gas prices are 63% higher this year than they were in 2005, and more than triple their 2003 levels.

Wholesale prices in the UK are now the highest in Europe, the company added.

Market distortions

British Gas said a main cause of the increases were anti-competitive practices in Europe, where gas and power markets have been slower to liberalise than in the UK and many of the largest companies are still state-owned.

Workers seal a gas pipeline
UK gas companies have complained about their access to gas pipelines

Earlier this month, British Gas-owner Centrica estimated that UK consumers have paid an extra 300m for gas this winter because of problems with the European gas supply system.

The problems prompted the group to warn in December, just months after raising prices by 14%, that tariffs would have to rise once more.

Centrica said a lack of competition had made it difficult to get enough gas to meet demand at peak times.

Its British Gas has a 55% share of the gas market and 23% of electricity. It has eleven million gas accounts and six million electric.

The supply and pricing problems have become so acute that the European Union has launched an investigation into the gas and electricity sectors in an effort to crackdown on anti-competitive behaviour.

Without naming companies, EU competition boss Neelie Kroes said on Thursday that a number of firms now faced separate probes.




BBC NEWS: VIDEO AND AUDIO
How price rises will affect the average household




SEE ALSO:
Hain's SOS on rising energy costs
17 Feb 06 |  North East Wales
Energy firms 'holding back gas'
16 Feb 06 |  Business
Centrica warns gas bills to rise
16 Dec 05 |  Business
Power prices rise at EDF Energy
15 Feb 06 |  Business
Scottish Power ups energy prices
09 Feb 06 |  Business
Centrica loses more gas customers
09 May 05 |  Business


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