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Last Updated: Monday, 6 February 2006, 18:18 GMT
Gas prices 'set to rise further'
Gas ring on cooker
Centrica says wholesale gas prices have risen 75% over the past year
UK consumers are facing another big rise in their annual gas bills, according to newspaper reports.

The Mail on Sunday said British Gas is planning a 25% price hike this week, a move that has provoked criticism from consumer groups and charities.

British Gas denied that a firm decision had been taken, but admitted prices would rise significantly.

Trade and Industry Secretary Alan Johnson said UK gas prices were lower than in many other parts of Europe.

"We are still at the level in real terms of gas prices in 1988 and we are certainly below domestic gas prices in the rest of Europe, where they haven't had the same level of liberalisation," he told MPs on the Trade and Industry Select Committee.

He advised consumers to consider switching suppliers if they were unhappy with rising energy bills.

New figures show that British Gas has only 53% of the gas market as other suppliers have started to offer supplies.

The energy regulator Ofgem, which produced the figures, said 300,000 people a month had been switching to new energy companies as a way of combating higher prices.

The government must intervene urgently to raise the level of the winter fuel allowance
National Pensioners Convention

Although all energy firms have put up prices in the last two years, the regulator said there were still significant differences in their tariffs.

It said the 10 million customers who had never moved were losing a billion pounds a year between them, as each could typically save about 100 a year on their combined gas and electricity bills.


Pensioners have now called for a rise in the winter fuel allowance to match any increases in energy prices.

"The government has said it will freeze the winter fuel allowance for the next few years - meaning that pensioners will effectively be worse off," said the National Pensioners Convention (NPC).

"The government must intervene urgently to raise the level of the winter fuel allowance."

Age Concern said it was worried about how the elderly would cope with higher gas bills.

"Rising fuel costs mean older people on fixed incomes will struggle more than ever to keep warm, which could mean even more deaths," said Age Concern.

"More than 28,000 people over 65 died from cold-related illness last winter, when temperatures were warmer than they have been this year."

Supply problems

Wholesale gas prices have jumped by 75% over the past year, according to British Gas.

Europe's failure to open up its energy markets is costing UK customers dear
Mark Clare, British Gas managing director

"Clearly, all suppliers are buying their gas in the same market, therefore we would expect that suppliers will be increasing their tariffs substantially as we go through 2006," the company said.

"But we haven't said anything about timing or scale of an increase," it added.

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

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

In December, the company warned it was selling gas to its customers at a loss.

It added that the way gas contracts were currently structured - being linked to the price of oil - could cost European consumers as much as 40bn this year.

'Lessen the impact'

Duncan Sedgwick, chief executive of industry trade body Energy Retail Association, said that with wholesale gas prices increasing so much over the past year, it was sadly inevitable that some of the rise would have to be passed onto consumers.

"The UK no longer has the luxury that we used to have when all of our gas came from the North Sea," he said.

"All of the retailers, both individually and collectively, are looking to lessen the impact of price rises on the most vulnerable or 'fuel poor'."

Any price pressures may prove to be short, rather than long-term problems as more infrastructure is built, analysts said.

"The very high wholesale prices are likely to continue for probably another 12 months, but after that they are likely to fall off a cliff," said Patrick Heren, chairman of Heren Energy, which monitors gas prices.

Energywatch responds to the possible rise in gas prices

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