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Friday, 17 February 2006, 15:28 GMT

British Gas raises prices by 22%

Wholesale gas prices have risen sharply 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

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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

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.




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Related to this story:
Hain's SOS on rising energy costs (17 Feb 06 |  North East Wales )
Q&A: What's behind gas price pressure? (06 Feb 06 |  Business )
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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