British Gas provokes fury with biggest ever price rise. 35% hike comes as parent company prepares to announce £880m profit.

Average annual gas bill, medium user, all suppliers, standard credit British Gas yesterday increased the pressure on household budgets after announcing the biggest ever increase in gas prices for its 16 million customers. The 35% rise in gas bills was blamed on higher wholesale costs but came just hours before British Gas's parent company, Centrica, was due to reveal profits of £880m for the first half of the year.

Consumer groups reacted with anger to news that will dismay every gas-using household in the country. The move is expected to send another 1 million families into fuel poverty if replicated across the industry. EDF Energy, one of the other five major suppliers, announced a 22% rise in gas prices last week.

Adam Scorer, of the consumer group Energywatch, said he was surprised by the increase. "I'm not sure that many consumers will be able to fully take in the news that their gas bills are going up by over a third," he said.
Help the Aged said it was a "disaster" for the millions of pensioners already struggling to heat their homes.

From today, British Gas's 15.9 million customers will be paying 35% more for their gas, and 9% more for electricity. The company said the average dual fuel customer who was paying £913 for their joint gas and electricity bills at the beginning of 2008, has seen them jump by more than £400 to £1,317 - this at a time when many households are struggling to pay increased petrol and food bills. The company said it would protect the most vulnerable 340,000 customers, most of whom live on benefits, from the increase. The 2.1 million customers who signed up for capped products also escape the increase, for now.

British Gas managing director, Phil Bentley, defended the price hike. "We very much regret that we have had to make this decision at a time when many household budgets are already under pressure. The simple fact though is that we have entered an era of unprecedented high world energy prices. The only answer to cope with higher energy prices, I'm afraid, is for all of us to be more energy efficient."

Bentley said profits for the retail arm of the energy giant Centrica were down by 69% to £166m for the first half of this year. However, industry analysts noted these figures were in comparison to the bumper £577m profit the company announced for the same period last year.

Scorer warned that customers may be looking with considerable interest at the Centrica profit statement today. "It is now an absolute imperative that government directs the European competition authorities to explore every avenue that might return some sanity to the gas price," he said.

Following EDF's price rise on Friday, the remaining four big energy suppliers are expected to follow in the coming weeks. All have claimed that the price of wholesale gas for delivery this winter has jumped 89%.

In recent months energy prices have become a huge political issue. The government has been forced to rip up its targets on fuel poverty after admitting they are no longer achievable. Earlier this year Gordon Brown travelled to Saudi Arabia in an effort to get production increased, and to ease petrol prices that have also risen by a third.

The Liberal Democrat leader, Nick Clegg, said the British Gas hike would be "devastating" for many families, particularly the elderly and vulnerable. "The announcement may have been made in a hot spell in July, but when winter comes round thousands will be forced to choose between heating their homes and cooking their meals.

"Energy companies are benefiting from a £9bn windfall yet continue to hike up their prices on the government's watch. This is unacceptable." The shadow energy minister, Charles Hendry, said: "The government has not done enough to improve energy efficiency in the home, they have not built sufficient gas storage and they haven't succeeded in negotiating an open market across the European energy sector. "As a result of this, people are in for a desperate time this winter, as millions of families will face real hardship and an extra million more people are likely to join the 4.5 million already in fuel poverty."

(By Miles Brignall, The Guardian, 31/07/2008)