British Gas to raise bills for businesses by up to 7%: Changes to 'interruptible' supply contracts will affect 500 companies

BRITISH Gas is to raise prices for hundreds of businesses by up to 7 per cent, adding millions of pounds to the nation's fuel bill.

The company blamed the increases on higher costs, uncertainties in supplying gas, and the regulatory requirement to stick to published price schedules rather than negotiate prices with individual customers.

The rises will affect 500 customers on 'interruptible' gas contracts - a low-tariff system under which they pay less in return for allowing British Gas to cut off supplies when it needs to meet peaks in domestic demand.

Ian Powe, director of the Gas Consumers Council, said: 'This is part of selective price increases while British Gas defends itself against competition. British industry will see it as callous exploitation of a de facto monopoly in interruptible supplies in order to recoup lost profits in firm-contract sales.'

Competitors have already taken 84 per cent of firm-contract sales to large companies, undercutting British Gas by up to 20 per cent.

Potential competitors to British Gas, including electricity companies, argue that a rise in British Gas interruptible prices will sharply increase pressure on the Government from businesses to introduce competition in domestic gas supply.

They say rivals have not entered the interruptible market because they are precluded from selling to households.

Peter Rost, chairman of the Major Energy Users Council, also accused British Gas of abusing its dominant position in the marketplace. 'The only answer is genuine competition (in all sectors of the market),' he said. He called on the Government to introduce competition in the domestic market as soon as possible, backing the view that this would also enable competition in interruptible gas supply for industry.

The Consumers' Association also called for competition in domestic gas supply to be introduced as quickly and fairly as possible. It says that if rivals are allowed into the market, household gas bills will fall. It rejects the British Gas claim that prices for some domestic customers will rise in a competitive market.

British Gas said the decision to increase interruptible prices had 'nothing whatsoever' to do with the issue of domestic supply. The price changes would affect about 500 customers in industry and commerce and would come into force at different times.