British Gas to raise domestic energy prices

British Gas is to increase gas and electricity prices to millions of domestic customers by 5.9 per cent because of "cost pressures".

The increase will take effect from 10 January for about 12.5 million customers, and on 1 March for 2.5 million pre-payment customers. The new prices, announced yesterday, will mean an extra 39p a week on gas and 28p a week on electricity for the average domestic customer.

Mark Clare, managing director of British Gas, said: "Underlying wholesale energy costs have risen since the summer and continue to rise. Like other suppliers, we are being forced to reflect these increased costs in our prices. Over the last few months we have been absorbing these additional costs, but unfortunately we are no longer able to do so."

British Gas said underlying wholesale gas prices had increased by 15 per cent over the past year and predicted a further 21 per cent rise in 2004. It said wholesale prices of electricity had risen by 15 per cent this year and were predicted to increase by a further 17 per cent next year.

British Gas raised its prices by 2.5 per cent in April and other energy firms have also increased domestic prices over recent months. The cost of gas on the trading market has risen over the past year, partly driven by growing concern that Britain will soon have to import gas, although the high price of oil has also been a factor.

Allan Asher, chief executive of energywatch, the gas and electricity consumer watchdog, said: "We are surprised and disappointed at this increase. There were significant reductions in wholesale energy prices over the past few years, but these were not passed on to consumers. It seems grossly unfair that consumers should now have to pay significantly more."