British Gas scraps price freeze tariff

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British Gas withdrew its offer to freeze domestic bills until 2010 yesterday as wholesale gas prices surged on renewed fears that the UK is about to be hit by Arctic weather conditions.

Centrica, the owner of the British Gas brand, said its special price protection tariff had been removed because it had signed up 1.2 million customers - the target it set when the offer was launched.

Meanwhile, wholesale gas prices jumped another 14 per cent to 80p a therm after the Russian gas producer Gazprom cut supplies to Europe to cope with freezing weather back home. Temperatures in Moscow have dropped as low as minus 40 degrees C, forcing authorities at the city's zoo to feed the animals with vodka to keep warm.

The wholesale price of gas, which makes up about half the typical domestic bill, has risen by one-third since the start of the week. Wholesale prices are 75 per cent higher than a year ago, even though traders insist there is still plenty of gas flowing through the system in Europe.

Mark Clare, the managing director of British Gas, said he was confident the UK would not suffer any shortages because less than 2 per cent of its gas came from Russia.

But he warned of the "worrying domino impact" on the wholesale gas market of Gazprom's action, adding that there was now an extra "anxiety premium" on prices which were already at a record high.

The independent price-comparison website said there had been a huge increase in demand for capped and fixed-price energy tariffs after the 32 per cent increase in gas prices and the 24 per cent rise in electricity bills since the beginning of 2004.

It urged British Gas to reintroduce a similar tariff soon but said it was still possible to switch to other suppliers offering special deals. EDF Energy's prices are frozen until January 2008, while ScottishPower's are frozen until October 2007. Powergen's are capped until October 2007 and npower's until next January.

Shares in Centrica closed up 6.5p yesterday at 258p.