EDF breaks ranks to raise gas prices by 22 per cent

EDF Energy, one of the UK's biggest suppliers of gas and electricity, confirmed customers' worst fears yesterday with swingeing increases in the cost of its energy bills that are almost certain to be followed by rivals.

EDF, which has five million customers in the UK, is to raise gas bills by 22 per cent with immediate effect, while electricity bills will rise by 17 per cent. Ann Robinson, the director of consumer policy at the price comparison service uSwitch, said these increases would add £204 to the average annual costs of someone buying both gas and electricity from EDF, taking their bill to £1,211.

EDF's increase is likely to anger customers because the oil price, to which gas and electricity bills are closely linked, has fallen by 13 per cent over the past six weeks. But EDF said it had no choice but to raise bills, because its wholesale energy costs had risen by up to 70 per cent since January, when it also raised bills by up to 13 per cent.

"Record world oil prices have continued to drive up wholesale gas prices and alongside unprecedented rises in wholesale coal and electricity costs, this has impacted hugely on the cost of supplying energy to our customers, said Eva Eisenschimmel, EDF Energy's chief operating officer. "We now have to pass on some of the resulting rise in wholesale costs."

But EDF promised to offer discounts to "fuel-poor" customers identified as particularly vulnerable to rising energy bills.

Energy experts warned that while EDF had broken ranks by being the first energy provider to raise bills, it would almost certainly be joined by leading rivals. "This move is expected to kick-start the second round of price rises this year," Ms Robinson said. "The outlook for consumers appears bleak."

British Gas, Britain's biggest energy supplier, could announce price increases as soon as next week, when its parent company, Centrica, is due to publish its financial results for the first half of the year. Scottish and Southern Energy, another member of the big six, warned on Thursday that it would not be able to delay price increases for much longer.

To add to consumers' woes, there is also concern that a summer round of price increases will be followed by further hikes early next year.

Joe Malinowski, the founder of The Energy Shop, said the rise in wholesale energy costs had been so large that EDF might have imposed larger increases. "It could have been a whole lot worse," he warned. "Even after this increase we can expect another £200 on energy bills in the winter of 2009 unless wholesale energy prices come down dramatically."

The winter price increases are currently forecast to add a further 15 to 20 per cent to bills.