British Gas blames wholesale rise for huge spike in energy bills

Around 9 million people will see their gas bills rise by an average of 18 per cent next month.

British Gas blames increases in wholesale prices for the jump in domestic bills. Some customers face a 24 per cent hike in their gas costs, depending on where they live and how they are charged. A 16 per cent rise in electricity prices is also being introduced by British Gas, leaving customers who receive both from the supplier typically facing an extra £190 on their annual bills.

After Scottish Power announced similarly dizzying rises last month, British Gas warned customers there may be little point in attempting to change supplier as the move looks set to be repeated throughout the industry, due to wholesale prices having swollen by almost a third since winter.

This latest rise, which comes on top of a 7 per cent increase in December, was announced only two days after a study by uSwitch.com showed 6.3m households in the UK are classed as being in fuel poverty for spending at least 10 per cent of income on energy bills.

It was condemned by customer champion Consumer Focus, whose chief executive Mike O'Connor said prices have risen by about 44 per cent for gas and 21 per cent for electricity since 2008 – despite wholesale prices being a third lower than the peak they hit that year. In that time, said Mr O'Connor, "suppliers have made healthy profits".

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

But British Gas defended the increase, saying that it "cannot continue to make a loss on the energy it sells" as it needs to turn a profit so as to invest in future energy sources.

The Energy and Climate Change Secretary, Chris Huhne, said Britain's reliance on gas and old-fashioned forms of electricity generation, which are particularly sensitive to market fluctuations, was partly to blame.

"The UK electricity market has to change, so that we escape the cycle of fossil-fuel addiction," he said. "Alternatives like renewables and nuclear power must be allowed to become the dominant component of our energy mix."

Meanwhile, another energy firm, Scottish and Southern Energy (SSE), announced the suspension of its door-to-door sales with the loss of 900 jobs.

The company said it had taken the decision because public confidence had been lost in doorstep salespeople, two months after SSE was found guilty of using them in misleading selling. It is appealing against the verdict.

Scottish Power announced last month that customers who it supplies with both gas and electricity are likely to find themselves paying, on average, an extra £180 a year. The average bills will rise from £1,211 to 1,391.