British Gas under fire after 15% rise in gas and electricity prices

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The Independent Online

British Gas raised bills for gas and electricity by 15 per cent yesterday, pushing average annual bills for 13 million customers past £1,000 and prompting further calls for a regulatory inquiry into the UK's £25bn-a-year energy business.

Britain's biggest energy supplier said steep rises in wholesale prices for 2008 had forced the increase, which adds £139 to the average dual-fuel bill.

Ten million other customers are already paying higher energy bills this month, after EDF's decision to raise electricity by 7 per cent and gas by 12 per cent, and Npower's 12 per cent rise in electricity and 17 per cent rise for gas.

All three companies blamed rising costs on the wholesale fuel market, with forward prices for gas in 2008 rising by 51 per cent and electricity by 61 per cent.

British Gas complained that its operating margin on UK supplies in the past six months had been reduced to 1 per cent and said it would make a loss this year without raising prices.

Its managing director Phil Bentley said: "As the UK's biggest buyer of gas, we want lower gas prices – however, lower availability of supplies from both the UK and the Continent, coupled with higher global oil prices, have forced up wholesale prices. We can't absorb the burden of these higher energy prices."

British Gas said that 340,000 customers on its Essentials social tariff would only have to start paying the price rise this spring. A further 2.4 million BG customers on fixed rates will also be unaffected by the rise.

But consumer groups said the move would push thousands of people on low incomes into great difficulty at the height of winter just after the company's owner, Centrica, announced record half-year profits of £533m.

Energywatch called for the Government to order a Competition Commission inquiry into the domestic fuel market, amid claims that the existing big six players raise price suspiciously quickly after each other and stifle new entrants. "Energy price rises are coming in thick and fast and like every other consumer I'm sick and tired of hearing energy companies try to justify the latest bout of pain they are inflicting on their customers," said Allan Asher, Energywatch's chief executive.

The watchdog said an inquiry should look at whether the reduction from 20 to six in the number of energy providers concentrated the market in too few hands, whether small players had been forced out and whether long-term supply contracts gave companies excessive information and control.

Every 1 per cent rise in average prices adds another 40,000 to the 4 million households in "fuel poverty" who have to spend at least 10 per cent of income on gas and electricity.

The price comparison website warn-ed that British Gas had now surrendered its price advantage and become the second most expensive supplier, after Npower.

Its spokeswoman Ann Robinson said: "Last year, British Gas spent £53m on advertising, convincing consumers that it had turned over a new leaf. Now it is getting back to what it does best – shoddy service, high prices and poor value for money."