Households face big increase in gas and electricity prices

Energy provider npower announced it is to increase the cost of gas and electricity for the second time in a year.

Energy provider npower announced it is to increase the cost of gas and electricity for the second time in a year.

About 6.3 million users across the UK will see their gas bills rise by 11.8 per cent and electricity by 7.6 per cent, although these costs will then be frozen until 2006. The move comes just two weeks after British Gas, the UK's largest provider, announced price hikes for its millions of customers.

The company said the increases were in response to a significant rise in wholesale gas and electricity costs and would come into force on 1 October. It is not the first time this year its customers have had their wallets dented by an energy price rise - costs for its gas customers have soared by just under a fifth this year.

The latest increase will add around £23 to an average electricity bill of £270 a year and £42 to an average gas bill of £337 a year, according to estimates.

David Threlfall, chief executive of npower retail, said: "We realise that any increase is unwelcome and has implications for households trying to manage their bills, so our new rates will be frozen until 2006, allowing all our customers to budget with confidence."

He blamed the price hikes on an "unprecedented" rise in wholesale gas costs of nearly 40 per cent over the year, which affected all suppliers. This in turn affected the cost of electricity, 40 per cent of which is produced by gas-fired power stations.

A spokesman for the gas and electricity consumer watchdog, Energywatch, said the announcement was a blow to consumers. "This is another very, very significant and disturbing trend of gas and electricity price increases. It was not a surprise and the scale of the rise will take many of npower's customers aback."

He said a rise of 40 per cent in gas prices without any clear cause was not acceptable. "This highlights the absolute necessity of competition investigation into the problems in the wholesale gas market.

"This has been going on for some time and we think gas and electricity prices will continue to rise, meaning customers will be further hit by increases in their bills. It needs serious investigation by a body like the European Commission, who can take an overview of the pressure across Europe and the effects on the UK."

Last month British Gas said that its household gas bills would rise by 12.4 per cent and electricity by 9.4 per cent from 20 September.

Mark Clare, the company's managing director, said: "The era of cheap UK energy is over." Depletion of North Sea and Irish Sea gas reserves, the UK's consequent need to import larger volumes of gas, and higher oil prices were pushing up wholesale prices, Mr Clare said.

A spokesman for the gas and electricity regulator Ofgem said customers needed to shop around in order to get the best deal. A spokesman said: "This is especially true if they've never switched before because our research consistently shows that those people are paying considerably more than they have to. There are no prizes for loyalty in the energy market."

People should look at saving money in the long-term through energy efficiency, he added. Families could save an average of £90 a year with loft insulation, £40 a year by installing a modern boiler and £20 a year if they paid by direct debit.

¿ For those wanting to switch supplier, Energywatch offers a list of companies and prices. Call 0845 906 0708 or visit www.energywatch.org.uk