£250 rise in energy bills for 12 million households

Twelve million households struggling to balance bills in the credit crunch will have to find an extra £250 a year for gas and electricity after the energy giants E.ON and Scottish & Southern announced inflation-busting rises.

Scottish & Southern, which has 8.8 million customers, is raising prices by 29 per cent for gas and 19 per cent for energy on Monday, and E.ON, with 5.5 million customers, is increasing gas by 26 per cent and electricity by 16 per cent today. E.ON and Scottish & Southern – whose 1.7 million fixed-rate customers will not be affected – blamed the rises on the soaring wholesale gas price.

That means average fuel bills will have jumped by 33 per cent since January, from £912 to £1209. At the same time people have been hit by above-inflation rises for mortgages, food, council tax and petrol.

Energy customers have been warned to expect more pain in coming months. EDF and British Gas announced rises of 22 per cent and 25 per cent last month and the remaining "Big Six" companies, nPower and ScottishPower, are expected to lift their prices in the next three weeks.

Gas prices have risen by 60 per cent on the global market since February as a result of increasing global demand for energy and the link between gas and the booming oil price on the continent, which now exports gas to the UK. They jumped a further 14 per cent on Wednesday when a leak forced the closure of a North Sea gas pipeline in Norway, which one analyst said would "significantly" reduce gas exports to European countries.

Announcing the increase yesterday, Graham Bartlett, E.ON's retail managing director, said: "I'm very aware of the effect that today's announcement will have on our customers and I recognise that this is a very tough time for everyone."

But an Energywatch spokes-man, Adam Scorer, said: "Companies raising prices at the same time and by very similar amounts is what prompted the regulator Ofgem to launch its probe into the energy industry. The impact on every consumer is going to be harsh. But British Gas, E.ON and Scottish & Southern have not raised their online tariffs."

Price comparison websites advised households to move to the cheapest tariff and to minimise energy use. Tim Wolfenden, of uSwitch.com, said: "Soaring energy bills pose a huge threat to our standard of living: gas and electricity are essential commodities which have now become a luxury many can no longer afford."

Age Concern feared that the number of pensioners in fuel poverty, spending at least 10 per cent of their income on heating and powering their homes, would rise to one in three. Ed Matthew, a climate campaigner at Friends of the Earth, said the rises were "nothing short of a national disaster" for the poor. "The only way to fully protect people from ever-rising global fuel prices is to ensure every home in the UK is super-insulated and has access to green energy systems," he said.

"Fuel bills and carbon emissions in UK homes could be slashed by two-thirds as a result."

How to cut your fuel costs

* Pay by direct debit – monthly or quarterly cheque payments are much costlier.

* The cheapest deals are online, dual-fuel, paid monthly by direct debit.

* Pre-payment meters are up to £500 more expensive than the lowest tariff.

* Fixed deals look like a good bet as prices continue to climb.

* Loft insulation for a three-bed semi costs £199, saves 15 per cent on annual bills and pays back the investment in 15 months.

* Cavity wall insulation costs £175 for a three-bed semi, saves 15 per cent of bills and pays back in 17 months.

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