Co-op begins price war in bid to break Big Six stranglehold by holding increase at 4.5%

Increase in cost of British Gas bills to be implemented next month

The Big Six energy firms were under pressure to limit their price rises last night after a rival supplier pledged to hold increases at just 4.5 per cent.

Co-Operative Energy today revealed a price hike for its 150,000 customers – but said it would delay the increase until next year and limit the rise by swallowing half the cost of rising wholesale prices itself.

The announcement came amid a political row about how hard-pressed Britons should deal with soaring energy bills, after the Prime Minister’s spokesman said consumers “may wish to consider” wrapping up warm at home to help to keep their heating bills down.

Downing Street later insisted that Mr Cameron was not seeking to tell people they should put on a jumper when temperatures drop, but the comment was jumped on by the Labour leader, Ed Miliband, who said: “[The Conservatives’] crime policy used to be: ‘Hug a hoodie’. Now their energy policy appears to be: ‘Wear a hoodie’.”

Mr Miliband continued: “These responses to the energy price rises show how little Mr Cameron and his Government stand up for the interests of hard-working people.

“He has no grip on the cost-of-living crisis and he seems to think the solution to this crisis is nothing to do with him. Energy bills are already up by an average £300 since he took office. The price hikes we are seeing point to a market that isn’t working for consumers.”

Co-op’s announcement today means customers of the firm will face a price increase of less than half the hike announced by the energy giant British Gas on Thursday, which is forcing its customers to pay 9.2 per cent more to heat their homes from next month. The rise is also significantly lower than SSE’s increase of 8.2 per cent. The other major energy suppliers are expected to announce their rises in the coming weeks.

“Costs are going up but we don’t have to pass them all on to our customers,” said Co-op Energy’s general manager, Ramsay Dunning.

“Our customers own our business so we decided to go halves on the increase and absorb the remaining cost ourselves.”

The move was welcomed by consumer groups. The executive director of Which?, Richard Lloyd, said: “Consumers will be asking how a small supplier like Co-operative Energy can absorb increased costs, when the biggest suppliers say they can’t.”

The chief executive of Citizens Advice, Gillian Guy, said: “Firms sharing the rise in wholesale costs is helpful to stretched households. It does bring into question why the big firms who have put their prices up couldn’t do the same.”

Mr Dunning said Co-op can act differently from the Big Six energy suppliers because it doesn’t have to report to shareholders, who are often overseas. “We need to show that we’re doing all we can to put customers first and build trust,” he said.

“The profitability level we require is less than, for instance, British Gas’s 5 per cent. We share profits with our customers through annual dividends and we reinvest in the business to sustain the business. And, unlike the big energy firms, there’s no money going out to shareholders.”