British Gas to raise prices by 9.2%

  • 17 October 2013
  • From the section Business
Media captionThe price rise is "unwelcome news" admits Ian Peters from British Gas - but he says profits are not increasing

British Gas is to increase prices for domestic customers, with a dual-fuel bill going up by 9.2% from 23 November.

The increase, which will affect nearly eight million households in the UK, includes an 8.4% rise in gas prices and a 10.4% increase in electricity prices.

The company said it "understands the frustration" of prices rising faster than incomes. The average annual household bill will go up by £123.

PM David Cameron has urged consumers to switch suppliers for the best deal.

Energy Minister Ed Davey has described the latest price rise as "extremely disappointing news" for customers.

Rival SSE has already announced an 8.2% increase in bills from 15 November.

Energy debate

On average, customers will see a dual-fuel bill increase to £1,444 a year.

However, there are significant regional variations. On average, the biggest increase in a dual-fuel bill is an 11.2% rise in the north of Scotland, in the Scottish Hydro Electric region. The smallest is a 6.8% increase in the south west of England.

The company said that the cost of buying energy on the global markets, delivering gas and electricity to customers' homes, and the government's "green" levies, were all factors in the decision to put up prices.

"I know these are difficult times for many customers and totally understand the frustration that so many household costs keep on rising when incomes are not keeping pace," said Ian Peters, managing director of British Gas Residential Energy.

"We haven't taken this decision lightly, but what is pushing up energy prices at the moment are costs that are not all directly under our control."

Media captionTom Lyon from comparison site uSwitch said customers should fix their energy bills - "do it today"

The company, which operates as Scottish Gas in Scotland, said it made a profit of five pence in the pound after tax.

British Gas, the UK's biggest energy supplier, said in May that a profit boost would be used to delay future price rises. This came because customers used 18% more gas in the first four months of the year owing to the cold weather.

At the time, a spokesman said: "We will use that [cold weather benefit] to effectively hold prices for as long as possible."

Between August and December last year, the "big six" energy companies outlined price rises of between 6% and 10.8%.

Caroline Flint, shadow energy secretary, said: "These latest price rises show clearer than ever why Labour's price freeze is needed." Party leader Ed Miliband has pledged a price freeze for 20 months if his party wins the next election.

But the prime minister branded Mr Miliband's price freeze plan as a "con", saying that he did not have control over the worldwide price of gas.

Mr Cameron also said he was disappointed with the British Gas' announcement.

"I would encourage customers who are not happy with the service they're getting, are not happy with the prices, to go to the switching sites online and see whether they can get a better deal," he said.

Pressed on whether the government could do more to tackle the underlying issues, Mr Cameron added: "What we can do, which is what we are doing, is to try to get new suppliers into the market."

'Shop around'

Energy Minister Ed Davey also described the latest price rise as "extremely disappointing news" for customers of British Gas. He questioned the claim that costs imposed by the government were increasing as much as bills and told the Commons that unhappy consumers should consider switching suppliers.

However, industry analysts expect other suppliers to announce price rises in the coming weeks, which could affect consumers' switching decisions.

"The question now is whether it will be a trickle or a stampede. However, the fact is that households will be struggling to afford to keep warm this winter," said Tom Lyon, of price comparison website

Ofgem data shows the number of people switching energy companies is at the lowest since records began in 2003.

Out of more than 27.7m electricity customers, 658,000 people switched companies in the three months from March to June in 2013, 17% less than the same quarter a year before.

For gas, out of nearly 22m customers, 490,000 people transferred over the same three-month period, a 14% decline from 2012.

Personal finance commentator and campaigner Martin Lewis said it was important that, if consumers do decide to switch, they should focus on fixed rate tariffs.

Media captionEnergy Secretary Ed Davey: "British Gas needs to explain why it is so much more inefficient"

Because only two of the energy companies have currently put their prices up, those who switch now are likely to be hit with price rises if they switch to another variable rate tariff.

He said people can "beat the price hikes" by going to fixed tariffs.

Adam Scorer, of watchdog Consumer Futures, said: "We would urge anyone worried about their energy costs to shop around to try to find a better deal and ensure they are on the cheapest payment method, such as direct debit.

"There are also some discounted insulation and heating measures available and we would encourage people to take advantage of this to cut their bills."

Mr Davey said that British Gas would need to justify its decision "openly and transparently".

Many of British Gas's customers made their annoyance at the price rise known during a Twitter question and answer session with customer service Bert Pijls earlier this afternoon.

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