Gas rise takes home energy bills over �1,000

Calls for investigation into 25% price hike
· Fears for welfare of poor, sick and elderly customers

Richard Wray
Monday February 6, 2006
The Guardian


The energy regulator was facing demands for a full scale investigation into gas prices last night as it emerged that British consumers are to be hit with a record-breaking rise in gas bills.
British Gas is to inform its 11 million customers that their gas bills are going to rise by as much as 25% as the company, which supplies more than half of all UK households, tries to pass on some of the recent jump in the wholesale cost of gas.

The increase - the largest forced through by an energy supplier since the market was deregulated at the end of the 1990s - will see the average customer pay an estimated £209 extra a year, taking the average energy bill up to £1,030. It will be the third price rise in a year.

MPs will raise the issue today at a select committee meeting with the trade and industry secretary, Alan Johnson. He will face questions on the precarious state of the country's energy supply, which has lead to rampant price rises .

Consumer groups reacted angrily to British Gas's planned price rise, warning that it would condemn many vulnerable people to a very cold winter, while Age Concern warned that for some pensioners the move could be fatal.

Last year's winter deaths were the highest for five years, but this winter looks particularly severe, already ranking as the third coldest in the last decade.

"Many pensioners live on a low, fixed income and are hit particularly hard by hikes in their fuel bills," said Gordon Lishman, Age Concern's director general. "Despite the government's efforts to tackle fuel poverty, many older people will be anxious about their fuel costs and some will choose between heating or eating."

Ann Robinson, director of consumer policy at uSwitch.com, the online price comparison service, attacked the price rises and called for the industry regulator, Ofgem, to investigate. "We have been expecting an increase from British Gas but frankly these figures are shocking," she said. "There is insufficient justification for such excessive price rises. We will be looking to Ofgem to step in and investigate the reasons for these increases and verify that they are legitimate."

She estimates that the British Gas price rise will bring in an extra £1.23bn from customers. "This is a dramatic response to the recent volatility within the wholesale gas market, which is likely to subside in the near future. The fact is that British Gas ... is banking on customer apathy to keep its balance sheet looking healthy."

British Gas's owner, Centrica, pointed out yesterday that its consumer business has been loss making since the latter half of 2005 as bills have failed to keep pace with rising gas prices. The company said the wholesale gas price, which typically accounts for about half a customer's bill, had risen 75% over the winter, having gained 43% last year. "We are not going to comment on the timing or the size of any price increases but given the fact that wholesale gas prices are up 75% this year over last year it is more or less inevitable that all suppliers in this market will be pushing through substantial price increases," said a spokesman.

The recent rise in the wholesale gas price is due not just to increased demand during the cold weather but to a squeeze on supplies. Reserves from the North Sea are insufficient to meet UK gas needs, while supplies from mainland Europe have been patchy.

One focus of the government's recently announced energy review is the UK's reliance on gas from overseas. MPs have become increasingly concerned about the vulnerable nature of Britain's gas supplies after Russia halted the flow of gas to Ukraine last month.

These concerns will be voiced by members of the trade and industry committee today when they take evidence from Mr Johnson. They are also likely to question the minister over the likely impact of gas price rises on the government's own targets for reducing fuel poverty among the elderly, sick and disabled by 2010. From 2000 to 2003 the number of people deemed to be in fuel poverty fell from 5 million to 1.3 million, but rampant bill increases since then are understood to have taken the number over 2 million.

Adam Scorer, campaigns director at the consumer group Energywatch, said the government should also look at the state of the UK market where the 20 energy suppliers who sprang up after deregulation have been consolidated into just six major players who not only supply gas to residential customers but make huge profits from the wholesale market.