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British Gas in 35 per cent price rise shock

British Gas has announced staggering increases in the cost of gas in response to what the company described as “soaring wholesale energy prices”

Households face a 35 per cent hike in the cost of gas and a nine per cent rise for electricity, but the energy company insists this will be last price shock in 2008.

Dual fuel prepayment customers are marginally better off, but still face a 21 per cent increase, while normal dual fuel customers will see an increase of 25 per cent.

Meanwhile 2.1 million customers on fixed price tariffs can relax slightly as they will not have to fork out for any rises.

Adam Scorer, Director of Campaigns at energywatch, said:  “At a time when suppliers have been complaining about higher costs and difficult times, customers may be looking with some interest at the Centrica profit statement tomorrow (Thursday) morning.
“Whatever the profits made by Centrica these price rises are primarily driven by an irrational and toxic link between the price of gas and the price of oil.
'Just because decoupling that link may be complex and not certain to succeed quickly, is no excuse for not trying.
'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.

High prices seem hardwired into this market for the foreseeable future. That hits the poor the hardest. The most important policy issue facing the government is how to protect vulnerable consumers from these hammer blows. So far it has not taken the necessary steps to fight fuel poverty yet. It needs to act now.”
British Gas Managing Director, Phil Bentley, British Gas Managing Director, said: “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 and we will be contacting all our British Gas customers to show how they can save energy to try and offset these price rises.”

Wholesale gas prices for this winter rising 89 per cent on the previous year adding an extra £2 billion to commodity costs. Meanwhile, wholesale electricity is up 72 per cent.
Due to the increasing economic pressure British Gas Residential has seen profits collapse by 69 per cent in the first half of 2008 and is seeking to protect its profit margins of around 4.3 per cent.

Mr Bentley continued: “We’re working hard to take costs out of the business and are on target to save £60m this year, but we can’t absorb the impact of such high wholesale prices, which are increasing the market costs of the energy procured for our customers by over £2 billion. 

“We will continue to do all we can to protect our customers from high prices.  We are delaying the price rise for our vulnerable customers until after next winter, lowering the price increase for prepayment customers, launching a new fixed price tariff and helping all of our customers to make their homes as energy efficient as possible.'

Adam Scorer, Director of Campaigns at Energywatch, said: 'Centrica have taken steps to shield certain groups of consumers from the worse of the impact, and we do not discount that. But no one seriously thinks that the range of measures from suppliers or the programmes available from government are fit for the purpose of fighting fuel poverty.'

Click here to see the full explanation from British Gas on the price rises