British Gas hikes energy bills by 7%

Around eight million British Gas customers will face higher utility bills from next month as the energy supplier today confirmed a hike in tariffs.

Household bills for gas and electricity will increase by an average of 7% from December 10, which will amount to an increase of £1.50 on the average weekly dual-fuel bill. The increases apply to customers on standard and variable tariffs.

The company said rising wholesale prices had forced it to lift the bills, but vowed not to apply the increase to the company's 300,000 most vulnerable customers, such as the poorest pensioners.

The move follows a price lift by utility giant Scottish & Southern at the end of last month. SSE said it would put up its gas bills by 9% from December 1.

Industry regulator Ofgem recently warned that rising prices in the wholesale market - where suppliers buy their energy - could be passed on to the consumer.

British Gas, which is owned by Centrica, said it had witnessed a rise of more than 25% in wholesale gas prices since the spring.

The utility firm said today's increase followed two years of price cuts, meaning its average dual-fuel bills were still lower than in January 2009.

British Gas managing director Phil Bentley said: "We know that rising energy prices come at a difficult time for many in Britain.

"That's why we are not raising prices for our vulnerable customers, such as the poorest pensioners, until after this winter."

Mr Bentley said customers could keep their bills down by improving the energy efficiency of their homes.

Some 1.6 million customers on fixed price deals will not be affected in any way, British Gas added.

Today's announcement means an average British Gas customer's dual-fuel bill will rise annually to £1,239 from £1,157.

Customers identified as vulnerable will see bills held until April, the firm added.

In addition to a rise in wholesale prices, British Gas said other costs, such as transport and distribution, had increased by 6%.

Mr Bentley said as a result the company had recently been selling gas at a loss, which was "not sustainable".

But lobby group Consumer Focus said wholesale prices were around half their peak in 2008 and in the same period customers' prices have fallen by less than 10%.

Adam Scorer, director of external affairs at Consumer Focus, said: "Consumers will be dismayed by this news. Winter is going to seem that much colder and budgets are going to be that much tighter after this announcement.

"Consumers will feel that suppliers didn't make cuts when conditions allowed it, but are covering their profit margins as wholesale prices nudge up."

British Gas, along with the rest of the industry, will ramp up its spending on infrastructure over the next 10 years to secure supplies to households.

Mr Scorer said the cost of this investment would be recovered from consumer bills, which will continue to rise "dramatically" as a result.

British Gas saw profits nearly double in the first six months of 2010 to £585 million after the coldest winter for 30 years saw customers reach for the thermostat.