British Gas to push thousands into fuel poverty with huge price hike

Nine million customers will see their gas bills rise by an average of 18 per cent next month, after British Gas announced massive increases in its energy prices.

Some customers face a 24 per cent rise in their gas costs, depending on where they live and how they are charged. An additional 16 per cent average rise in electricity bills will add £190 to the typical yearly dual fuel bill.

After Scottish Power announced similar rises last month, British Gas warned customers there may be little point in attempting to change supplier as the move looks set to be repeated throughout the industry, due to wholesale prices having risen by almost a third since the winter.

"Rising wholesale costs is an issue facing all energy suppliers," said British Gas managing director Phil Bentley. "Our advice to customers is to wait and see what happens in the energy retail market before making any decisions about switching supplier."

This latest rise, which comes on top of a 7 per cent increase in December, was announced only two days after a study by uSwitch.com showed that 6.3 million households in the UK are classed as being in fuel poverty, for spending at least 10 per cent of their income on energy bills.

Consumer Focus condemned the rise, saying that consumer bills were now at a historical high despite wholesale prices still being a third lower than the peak they hit in 2008.

"This price rise will send a shockwave across the country," said the organisation's chief executive, Mike O'Connor. "The impact on customers will be severe, piling more pressure on severely stretched household budgets and pushing hundreds of thousands more households into fuel poverty. Consumers simply don't trust that energy companies have customers' interests at heart and rightly question whether prices are fair."

He added that the industry regulator, Ofgem, had "declared that energy firms are guilty of greedy and lazy behaviour, bamboozling customers and exploiting structural weaknesses in the market," and that customers should be treated more fairly. But British Gas defended the rise, and said it could not continue to make a loss on the energy it sold because it needed to invest in future energy sources.

The Energy and Climate Change Secretary, Chris Huhne, said Britain's reliance on gas and old-fashioned forms of electricity generation, which are particularly sensitive to market fluctuations, was partly to blame.

"The UK electricity market has to change, so that we escape the cycle of fossil fuel addiction," he said.

"Alternatives like renewables and nuclear power must be allowed to become the dominant component of our energy mix."

Meanwhile, another energy firm, Scottish and Southern Energy, announced the immediate suspension of its door-to-door sales, resulting in the loss of 900 jobs.

The company said it had taken the decision because public confidence had been lost in doorstep salespeople, two months after it was found guilty of using them in misleading selling practices in a case brought against it by Surrey County Council. It is currently appealing against the verdict.

Gas price rises

19% Scottish Power, effective from August 2011 (electricity prices will also rise by 10% at the same time)

18% British Gas, August 2011(electricity 16%)

9.4% Scottish & Southern, December 2010

6.5% EDF, March 2011(electricity 7.5%)

5.1% NPower, January 2011 (electricity 5.1%)