British Gas raises fuel bills for 17 million customers
By Michael Harrison, Business Editor
Published: 10 September 2005
Fuel bills are to soar for more than 17 million households after British Gas yesterday announced a big rise in gas and electricity prices.
The company, part of the Centrica group, blamed the 14.2 per cent increase on the huge rise in the wholesale cost of gas and electricity caused by soaring oil prices and declining reserves of gas in the North Sea.
British Gas said the increase in prices would take the average bill to £754 for a customer taking both gas and electricity - a rise of £96. But the independent consultancy uSwitch.com calculated that a family of four living in a three-bedroomed semi and consuming an average amount of gas and electricity would see bills rise by £104 a year to £821. British Gas later said its calculation was based on customers paying by direct debt rather than quarterly or in cash. For customers taking gas only, the average annual bill will rise by £57 to £462. For electricity customers the average increase will be from £268 to £307.
The move by British Gas, the market leader with 17.2 million customers, follows earlier increases by Powergen, which has 6 million customers, and EDF Energy, which owns London Electricity and Seeboard. Powergen announced increases of 12 per cent and 7.2 per cent for gas and electricity respectively, while EDF raised its tariffs by 15 and 10.7 per cent.
British Gas said that it had no option but to raise domestic prices because the wholesale cost of gas had risen by 50 per cent over the last year, while electricity had gone up by an even steeper 61 per cent.
However, it said that it had decided not to pass on the full increase in wholesale costs. Analysts estimate that had it done so, then the increase in domestic gas bills would have been in the region of 25 per cent.
When British Gas last raised bills a year ago there was an outcry from consumer watchdogs, who urged households to defect to other suppliers. The company has since lost nearly 1.5 million customers. This time it has followed the lead of other suppliers and is not likely to be affected to anywhere near that degree. However, Alan Tattersall of uSwitch still said anyone who had remained loyal to British Gas last year would do well to shop around for a better deal.
However, the decision not to pass on the full increase in wholesale costs will hit Centrica hard in the final quarter of the year. Centrica shares slipped 1.6 per cent as the company guided the market that earnings for 2005 would be towards the bottom end of the 17p-20p a share range pencilled in by analysts.
Mark Clare, managing director of British Gas, blamed the increase in bills partly on higher oil prices and partly on the lack of competition in the European gas market, where wholesale gas prices are fixed. "We are no longer an energy island - spiralling world oil prices are now having an unprecedented impact on the cost of gas as the UK is now dependent on imports," Mr Clare said.
The hope is that wholesale gas prices will begin to come down as new pipelines linking the UK to Norway and the Netherlands come on stream in 2007 and port terminals dedicated to handling imports of liquefied natural gas open.
But many believe the key to lower gas prices is a more liberalised European market. In Europe, gas prices are still indexed to the price of oil and because the UK's indigenous supplies of gas are running down, it is dependent on high-priced imports coming in through the interconnector between Belgium and Bacton on the east coast.
Fuel bills are to soar for more than 17 million households after British Gas yesterday announced a big rise in gas and electricity prices.
The company, part of the Centrica group, blamed the 14.2 per cent increase on the huge rise in the wholesale cost of gas and electricity caused by soaring oil prices and declining reserves of gas in the North Sea.
British Gas said the increase in prices would take the average bill to £754 for a customer taking both gas and electricity - a rise of £96. But the independent consultancy uSwitch.com calculated that a family of four living in a three-bedroomed semi and consuming an average amount of gas and electricity would see bills rise by £104 a year to £821. British Gas later said its calculation was based on customers paying by direct debt rather than quarterly or in cash. For customers taking gas only, the average annual bill will rise by £57 to £462. For electricity customers the average increase will be from £268 to £307.
The move by British Gas, the market leader with 17.2 million customers, follows earlier increases by Powergen, which has 6 million customers, and EDF Energy, which owns London Electricity and Seeboard. Powergen announced increases of 12 per cent and 7.2 per cent for gas and electricity respectively, while EDF raised its tariffs by 15 and 10.7 per cent.
British Gas said that it had no option but to raise domestic prices because the wholesale cost of gas had risen by 50 per cent over the last year, while electricity had gone up by an even steeper 61 per cent.
However, it said that it had decided not to pass on the full increase in wholesale costs. Analysts estimate that had it done so, then the increase in domestic gas bills would have been in the region of 25 per cent.
When British Gas last raised bills a year ago there was an outcry from consumer watchdogs, who urged households to defect to other suppliers. The company has since lost nearly 1.5 million customers. This time it has followed the lead of other suppliers and is not likely to be affected to anywhere near that degree. However, Alan Tattersall of uSwitch still said anyone who had remained loyal to British Gas last year would do well to shop around for a better deal.
However, the decision not to pass on the full increase in wholesale costs will hit Centrica hard in the final quarter of the year. Centrica shares slipped 1.6 per cent as the company guided the market that earnings for 2005 would be towards the bottom end of the 17p-20p a share range pencilled in by analysts.
Mark Clare, managing director of British Gas, blamed the increase in bills partly on higher oil prices and partly on the lack of competition in the European gas market, where wholesale gas prices are fixed. "We are no longer an energy island - spiralling world oil prices are now having an unprecedented impact on the cost of gas as the UK is now dependent on imports," Mr Clare said.
The hope is that wholesale gas prices will begin to come down as new pipelines linking the UK to Norway and the Netherlands come on stream in 2007 and port terminals dedicated to handling imports of liquefied natural gas open.
But many believe the key to lower gas prices is a more liberalised European market. In Europe, gas prices are still indexed to the price of oil and because the UK's indigenous supplies of gas are running down, it is dependent on high-priced imports coming in through the interconnector between Belgium and Bacton on the east coast.
Published: 10 September 2005
Fuel bills are to soar for more than 17 million households after British Gas yesterday announced a big rise in gas and electricity prices.
The company, part of the Centrica group, blamed the 14.2 per cent increase on the huge rise in the wholesale cost of gas and electricity caused by soaring oil prices and declining reserves of gas in the North Sea.
British Gas said the increase in prices would take the average bill to £754 for a customer taking both gas and electricity - a rise of £96. But the independent consultancy uSwitch.com calculated that a family of four living in a three-bedroomed semi and consuming an average amount of gas and electricity would see bills rise by £104 a year to £821. British Gas later said its calculation was based on customers paying by direct debt rather than quarterly or in cash. For customers taking gas only, the average annual bill will rise by £57 to £462. For electricity customers the average increase will be from £268 to £307.
The move by British Gas, the market leader with 17.2 million customers, follows earlier increases by Powergen, which has 6 million customers, and EDF Energy, which owns London Electricity and Seeboard. Powergen announced increases of 12 per cent and 7.2 per cent for gas and electricity respectively, while EDF raised its tariffs by 15 and 10.7 per cent.
British Gas said that it had no option but to raise domestic prices because the wholesale cost of gas had risen by 50 per cent over the last year, while electricity had gone up by an even steeper 61 per cent.
However, it said that it had decided not to pass on the full increase in wholesale costs. Analysts estimate that had it done so, then the increase in domestic gas bills would have been in the region of 25 per cent.
When British Gas last raised bills a year ago there was an outcry from consumer watchdogs, who urged households to defect to other suppliers. The company has since lost nearly 1.5 million customers. This time it has followed the lead of other suppliers and is not likely to be affected to anywhere near that degree. However, Alan Tattersall of uSwitch still said anyone who had remained loyal to British Gas last year would do well to shop around for a better deal.
However, the decision not to pass on the full increase in wholesale costs will hit Centrica hard in the final quarter of the year. Centrica shares slipped 1.6 per cent as the company guided the market that earnings for 2005 would be towards the bottom end of the 17p-20p a share range pencilled in by analysts.
Mark Clare, managing director of British Gas, blamed the increase in bills partly on higher oil prices and partly on the lack of competition in the European gas market, where wholesale gas prices are fixed. "We are no longer an energy island - spiralling world oil prices are now having an unprecedented impact on the cost of gas as the UK is now dependent on imports," Mr Clare said.
The hope is that wholesale gas prices will begin to come down as new pipelines linking the UK to Norway and the Netherlands come on stream in 2007 and port terminals dedicated to handling imports of liquefied natural gas open.
But many believe the key to lower gas prices is a more liberalised European market. In Europe, gas prices are still indexed to the price of oil and because the UK's indigenous supplies of gas are running down, it is dependent on high-priced imports coming in through the interconnector between Belgium and Bacton on the east coast.
Fuel bills are to soar for more than 17 million households after British Gas yesterday announced a big rise in gas and electricity prices.
The company, part of the Centrica group, blamed the 14.2 per cent increase on the huge rise in the wholesale cost of gas and electricity caused by soaring oil prices and declining reserves of gas in the North Sea.
British Gas said the increase in prices would take the average bill to £754 for a customer taking both gas and electricity - a rise of £96. But the independent consultancy uSwitch.com calculated that a family of four living in a three-bedroomed semi and consuming an average amount of gas and electricity would see bills rise by £104 a year to £821. British Gas later said its calculation was based on customers paying by direct debt rather than quarterly or in cash. For customers taking gas only, the average annual bill will rise by £57 to £462. For electricity customers the average increase will be from £268 to £307.
The move by British Gas, the market leader with 17.2 million customers, follows earlier increases by Powergen, which has 6 million customers, and EDF Energy, which owns London Electricity and Seeboard. Powergen announced increases of 12 per cent and 7.2 per cent for gas and electricity respectively, while EDF raised its tariffs by 15 and 10.7 per cent.
British Gas said that it had no option but to raise domestic prices because the wholesale cost of gas had risen by 50 per cent over the last year, while electricity had gone up by an even steeper 61 per cent.
However, it said that it had decided not to pass on the full increase in wholesale costs. Analysts estimate that had it done so, then the increase in domestic gas bills would have been in the region of 25 per cent.
When British Gas last raised bills a year ago there was an outcry from consumer watchdogs, who urged households to defect to other suppliers. The company has since lost nearly 1.5 million customers. This time it has followed the lead of other suppliers and is not likely to be affected to anywhere near that degree. However, Alan Tattersall of uSwitch still said anyone who had remained loyal to British Gas last year would do well to shop around for a better deal.
However, the decision not to pass on the full increase in wholesale costs will hit Centrica hard in the final quarter of the year. Centrica shares slipped 1.6 per cent as the company guided the market that earnings for 2005 would be towards the bottom end of the 17p-20p a share range pencilled in by analysts.
Mark Clare, managing director of British Gas, blamed the increase in bills partly on higher oil prices and partly on the lack of competition in the European gas market, where wholesale gas prices are fixed. "We are no longer an energy island - spiralling world oil prices are now having an unprecedented impact on the cost of gas as the UK is now dependent on imports," Mr Clare said.
The hope is that wholesale gas prices will begin to come down as new pipelines linking the UK to Norway and the Netherlands come on stream in 2007 and port terminals dedicated to handling imports of liquefied natural gas open.
But many believe the key to lower gas prices is a more liberalised European market. In Europe, gas prices are still indexed to the price of oil and because the UK's indigenous supplies of gas are running down, it is dependent on high-priced imports coming in through the interconnector between Belgium and Bacton on the east coast.
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