British Gas hikes energy prices

Millions of households will see their utility bills break the £100 a month barrier after British Gas today announced price hikes of up to 24%.

Some nine million customers will be hit when the supplier raises gas and electricity prices by an average of 18% and 16% respectively from August 18.

The average dual fuel bill will rise by £190 a year to £1,219, pushing the average monthly bill to £101.58p, piling pressure on already-squeezed household incomes.

Last month, Scottish Power announced a similar hike in bills and the rest of the 'big six' suppliers are expected to follow suit in coming weeks.

Today's move intensified calls for a review of the energy market and will leave more households facing the choice between heating or eating.

British Gas said the hike was in response to a 30% increase in wholesale prices since last winter, claiming it was currently selling energy at a loss.

But Mike O'Connor, chief executive of Consumer Focus, said wholesale prices are still a third lower than their peak in 2008 yet British Gas had hiked gas and electricity prices by around 44% and 21% respectively in that period.

He added: "This price rise will send a shock wave across the country. The impact on customers will be severe, piling more pressure on severely stretched household budgets and pushing hundreds of thousands more households into fuel poverty."

Consumer Focus has called for a review of the energy market, including an end to complex tariffs and increased transparency to allow regulator Ofgem to judge whether bills are fair.

Ofgem recently called for the industry to be overhauled after it found that the 'big six' companies had put up prices more quickly than they reduced them when costs fell. It accused them of "failing to play it straight" with consumers and threatened to refer them to the Competition Commission if they failed to simplify prices.

British Gas last raised its bills by an average of 7% in December, adding £1.50 to the average weekly dual fuel bill.

The most recent rise means that some bills will increase by as much as 24% depending on how customers pay and where they live. The minimum increase will be 12%.

Managing director Phil Bentley, said: "We know there is never a good time to raise prices but we are buying in a global energy market and have to pay the market rate."

But he advised customers to wait and see what happens in the energy market before switching supplier in a clear hint that he expected price hikes across the board.

British Gas, which serves nearly half of households in the UK, announced the hike during a press conference held by Prime Minister David Cameron about the News of the World phone-hacking scandal.

The company offered numerous ways for customers to keep their bills down, including fixing their rate, improving insulation in their homes and providing energy monitors.

Richard Lloyd, executive director of consumer campaigner Which?, said: "Many people are already having to cut back on essentials because of the rising cost of living, and with energy bills rising further, this could be a cold winter for many."

Meanwhile, energy and climate change secretary Chris Huhne said Britain needs to invest in alternative forms of energy to make it less reliant on the fluctuating prices of fossil fuels.

He added: "Only radical reform now will give us the best chance in the long run of keeping the lights on at a price that doesn't wreck our economy over and over again."