BRITISH GAS TURNS UP THE HEAT AS ‘SENIOR SOURCE’ REVEALS RECORD PRICE INCREASES

February 8th, 2006

BRITISH GAS REVEALS RECORD PRICE INCREASES

• British Gas senior sources confirm 25% price increases on their way
• Increases will add £1.23 billion2 to gas bills for British Gas customers
• Price rises will mean 43%3 increase in the past 5 months
• British Gas customers to pay an extra £209 per year as bills set to rise from £8214 to £10305
• Energy giant will have raised gas prices by over 70% since start of 20046
• Average household energy bills for British Gas customers will have risen from £6067 to £1030 since start of 2004 – a difference of £424

Senior sources at British Gas have today revealed that the company is set to announce the biggest gas and electricity price increases in British history. The massive 25% increase, which is 10 times the annual rate of inflation, will find 11 million British Gas customers paying a staggering £209 extra per year, taking the average household energy bill up to £1030. Despite already being on average 12.5%8 more expensive for gas than its competitors, this figure is set to rise.
British Gas is blaming the rises on increases in the cost of wholesale gas – in spite of the fact that it buys the bulk of its gas on long-term contracts. This means that the company should have been insulated from the recent dramatic short-term movements in the wholesale gas market.
Ann Robinson, Director of Consumer Policy at leading switching and comparison service uSwitch.com comments: “We have been expecting an increase from British Gas, but frankly these figures are shocking. 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.
“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 will have increased its prices by 43% in the space of just five months, and is banking on customer apathy to keep its balance sheet looking healthy.
“Customers now need to vote with their feet and let British Gas know that this is one price rise too many. If enough people switch away this time it might make the company think twice before introducing increases of this magnitude in the future.”
The highest winter death toll in five years was reported in 20059, and there is a real fear that more people will die as they struggle to keep warm this winter. The poorest 6 million people in the UK are already on the verge of fuel poverty, spending 9% of their income on energy bills10. Worryingly, this 25% price increase will add 422,00011 households to the 3 million already living in fuel poverty in the UK12. This makes meeting Government targets to eradicate fuel poverty by 2016 highly improbable.
Ann Robinson continues: “Too little too late is being done for these people. There are around 1.9 million vulnerable customers in the UK13, 800,000 pensioners are already living below the poverty line14, and we estimate that almost half a million households will be pushed into fuel poverty as a result of these rises. Those people who are paying over 10% of their income towards energy bills are now in serious danger, and need a record increase like a hole in the head.
“This issue is compounded by the large numbers of people who are either not entitled to, or not claiming the benefits available. 50% of people that are in fuel poverty do not qualify for the Winter Fuel Allowance15, and only one in three pensioners claim the free benefits that they are entitled to. The percentage of a pensioner’s typical bill covered by the Winter Fuel Allowance will have fallen from 53% in 2003 to 31%16 once these price rises come into effect. Energy suppliers, along with the Government, have a duty to provide better information and greater financial support to those that need it most.”

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