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Energy customers face higher bills

Consumers are facing another round of energy price rises after the UK's biggest supplier revealed a further squeeze on its margins.

British Gas owner Centrica said the wholesale price of gas and power for delivery next winter is around 25% higher than last year, but the price paid by households has yet to reflect this higher price.

The company, which has around 16 million energy accounts, said its results for 2011 were likely to be "materially influenced" by the recovery of higher wholesale prices and other costs.

It said: "Market conditions for our residential energy supply business are significantly more challenging than in 2010."

A Centrica spokesman said the company had yet to take a decision about whether to increase tariffs.

The company pushed up bills by 7% after the coldest winter in 100 years but subsequently posted a 24% surge in operating profits to £742 million in 2010.

Centrica said increased profits from its exploration and production business were expected to more than offset lower profits from consumer-facing operations.

But it added that a decision by Chancellor George Osborne to increase the supplementary tax on oil and gas production from 20% to 32% in this year's Budget would offset the benefit of higher commodity prices.

It said in a trading update: "We continue to expect growth in our 2011 group earnings but at a more modest rate than anticipated at the time of our last results announcement as upstream profits have become more highly taxed."

The company has already warned the tax hike could mean that one of three fields in Morecambe Bay may not reopen following maintenance. Shares were 3% lower today.

Centrica said warmer weather this year, particularly last month, meant average residential gas consumption in the first four months of the year was 19% lower than the same period a year earlier, with electricity usage down 4%.

The number of residential energy accounts has grown in recent weeks to nearly 16 million accounts, slightly above the level at the end of 2010.

Ann Robinson, director of consumer policy at uSwitch.com, urged suppliers not to rush into another round of price hikes.

She said: "Clearly they are preparing the ground for a second round of price increases and consumers should definitely see this as a warning shot across the bows. That said, I would urge suppliers to hold fire for as long as they can.

"The price of oil has now fallen and the pressure suppliers are feeling could yet ease - given this I would urge them to keep a steady finger on the trigger and to protect consumers for as long as possible.

"It would be a shame for households to feel the pain of another round of price hikes if it later turns out to have been unnecessary."

In comments to the company's annual meeting, chairman Sir Roger Carr said Centrica was already a major contributor to the Exchequer, paying some £700 million in UK taxes.

He added: "Following changes announced by the Chancellor, UK tax levels for gas and oil are among the highest in the world.

"Sadly, it's probable that these changes will affect our plans to invest in the UK North Sea, which will have an impact on jobs and North Sea investment."

Sir Roger said the private sector had to front up the cash for investment but it was the Government that shaped the investment climate.

He added this would make it challenging to hit targets for £200 billion in private investment in low-carbon infrastructure by 2020.

The board was asked where it was likely to invest in the future, if not in the UK.

Sir Roger said Centrica was not "excessively adventurous" and that it would continue to focus on areas in which it had cultivated knowledge and experience, including North America and Trinidad & Tobago.

But Sir Roger emphasised the company's continued efforts to dissuade the UK Government from pursuing its North Sea tax policies.