British Gas under pressure to drop 25% rise in prices

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The Independent Online

British Gas is under pressure to abandon plans for its biggest-ever price rise, that would see gas bills leap by up to a quarter.

Furious consumer groups condemned the company after its plans emerged for a price hike more than 10 times the rate of inflation.

They warned the company that poor and vulnerable customers would die if they could no longer afford to heat their homes.

News of the price rise emerged after a source close to British Gas told The Mail on Sunday that increases of between 22 and 25 per cent were on their way.

The move would lift a typical combined gas and electricity bill from about £760 a year for a three-bedroom semi to about £950 a year.

The source said: "Directors have agonised about taking the decision because they know it is going to hurt everybody. But the harsh reality is we have no choice."

British Gas's 11 million customers will be notified of the price rise by letter later this month, possibly as early as this week.

Gordon Lishman, the director general of Age Concern, warned that rising fuel costs would cause more deaths as older people on fixed incomes struggled to keep warm.

"It's a national scandal that a growing number of older people are dying from the cold each winter," he said. "More than 28,000 people aged over 65 died from cold-related illness last winter, when temperatures were warmer than they have been this year.

British Gas signalled its determination to press ahead with its increase by pointing to sharp increases in wholesale gas prices. A spokesman for Centrica, which is the parent company of British Gas, said: "Wholesale gas prices for 2006 are up about 75 per cent on 2005.

Energy experts blame the dwindling gas supplies from the North Sea for the steep increase in the wholesale price of the fuel.

The price of oil has also soared in recent years and, because the price of gas in continental Europe is still linked to oil, that has had a knock-on effect on the price of gas in the UK, they say.

Import and storage capacity in the UK is inadequate, and has therefore not been able to offset declining North Sea production.

The price of electricity has also rocketed because gas is used to produce 40 per cent of Britain's electricity.

A spokesman for Ofgem, the industry regulator, said it had no powers to investigate price rises caused by market forces.

"At the moment, domestic customers in this country have the lowest gas prices in Europe," he said.