Gas and electricity prices to rise by over 14%

British Gas prices are set to rise by 14.2% for residential customers later in September.

The company blamed the increase on soaring oil and gas prices. The rise follows on recent similar price hikes by Powergen and EDF Energy.

The company said that the 14.2% increase in gas and electricity prices will take effect from 19 September 2005 and comes on the back of record highs in the cost of wholesale gas driven upward by record oil prices and declining reserves of North Sea gas.

British Gas pointed to a forecast that put gas prices for the second half of 2005 at 50% above the same period in 2004 and 31% above the market price for the first half of 2005. In the corresponding periods, electricity is 61% and 43% higher respectively.

British Gas said it was not fully passing through these higher commodity costs in this price increase as it continues to try to mitigate the impact on customers, including an intense focus on driving down operating costs.

Amid concern about the impact of rising energy costs on the fuel poor, British Gas will offer support to a quarter of a million of its most vulnerable customers through a rebate of up to £60.

One million customers who signed up to British Gas’ Price Protection, which caps energy prices until 2007, will not be affected by the price increase until April 2007.

British Gas will launch a further fixed price product, enabling dual fuel customers to fix their energy prices until 2010 at no extra cost.

The Managing Director of British Gas, Mark Clare, said: “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.

"In these difficult times it is more important than ever that our customers take action to save energy and so reduce their bills. British Gas already invests £130m a year in energy efficiency measures for customers and we will now offer additional incentives for those that are prepared to take action. We are also offering a winter rebate to offset the cost of this increase to our most vulnerable customers who would otherwise be hit hardest.”

While the company's pricing policy was to "fully recover the wholesale costs of energy" from customers, British Gas said that profits in the second half would be "significantly reduced".


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