End of 'cheap energy era' as gas prices increase 12%

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The Independent Online

Householders are facing the prospect of a sharp rise in gas bills after British Gas announced yesterday it was raising its charges by more than 12 per cent next month.

Householders are facing the prospect of a sharp rise in gas bills after British Gas announced yesterday it was raising its charges by more than 12 per cent next month.

The company blamed a 28 per cent surge in wholesale gas prices during the past year because of the worldwide rise in energy costs, and declared the era of cheap energy prices over.

From 20 September, residential prices will rise by 12.4 per cent for gas and 9.4 per cent for its electricity customers. British Gas said that would add 13p a day on gas bills and 7p a day on electricity for the average customer - equivalent to £47.45 and £25.55 a year respectively. The rises will hit the company's 18.4 million domestic customers - 12.2 million with gas and 6.2 million with electricity.

The increases are the latest impact of rising energy costs on households following successive leaps in petrol prices during the past few months.

Mark Clare, the managing director of British Gas, said wholesale gas prices had hit record levels, with the forward prices gas next year up by 50 per cent on 2003. "The UK energy industry has never faced such high wholesale gas prices," he said. "We have absorbed as much of these additional costs as we could, but unfortunately we now have to pass a proportion of them on to our customers."

He blamed the depletion of reserves in the North and Irish seas, which had forced the UK to import larger volumes of gas. "The era of cheap energy is over but we have confidence that the investments we are making in future energy supplies will, in the long term, put downward pressure on commodity costs," Mr Clare said.

There have already been sharp rises in gas prices this year. In the spring all of the big companies announced rises of between 5 and 15 per cent.

Since 2000, British Gas prices have risen by almost 28 per cent although the company insists its prices were 4 per cent cheaper excluding inflation than they were in 1996. It refused to rule out further rises. "We would expect the industry as a whole to seek higher prices in the coming month," a spokesman said.

British Gas's increases appear to be higher than those of its rivals. PowerGen prices rise 3.1 per cent, or £10 a year, next month. Customers in the Scottish-Hydro, Southern and Swalec regions owned by Scottish Power can expect gas bills to increase by an average 4.6 per cent, or £15 a year.

EDF Energy, which owns London Energy, Seeboard, Sweb and VirginHome, has said its five million customers would see an average 3.8 per cent rise for electricity and 3.5 per cent for gas.

Consumer groups urged British Gas customers to switch suppliers. "There are no prizes for loyalty in the energy market," said a spokesman for Ofgem, the government regulator, adding that customers could save up to £98 a year by switching.

Allan Asher, chief executive of the consumer group Energywatch, added: "This is a body blow to consumers. This price rise is going to add millions to bills and expose many thousands of households to the risk of fuel poverty."

British Gas said that it was putting £10m into a fund for grants that is put aside to help any of their customers struggling to pay bills.