British Gas bills to rise by 22%

British Gas bills to rise by 22%

Average energy bills for British Gas customers are set to top £1,000 a year after the company announced it was increasing gas and electricity bills by a record 22% from the beginning of next month.

The scale of the price rises prompted warnings that thousands more households would be unable to pay their bills and be pushed into "fuel poverty" - the term used to describe households where 10% or more of their income goes on paying gas and electricity bills. The increases outstrip recent rises by rival energy suppliers.

The consumer watchdog Energywatch described the increase by British Gas, which has 11.3 million gas customers and 5.9 million electricity users, as "the most serious single event in two years of trauma for energy consumers".

"The £1,000 average energy bill has now reached Britain, energy prices are back to pre-competition levels and will lead to 3 million households languishing in fuel poverty by the end of the year," the Energywatch chief executive, Allan Asher, said yesterday.

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The watchdog said the increase would push average gas bills for British Gas customers to £628 a year while electricity bills would be £391 a year. British Gas said the average bill for 40% of its customers who paid by direct debit would be £564 for gas and £374 for electricity.

A spokesman for Help the Aged called on the government and energy companies to do more to help the poorest pensioners.

"Much more can and must be done to protect older people from fuel poverty. No older person should have to make the choice between heating and eating."

The Age Concern director, Gordon Lishman, said: "Inflation busting increases in energy prices are a major strain for thousands of pensioners, particularly those on a low fixed income who are already struggling to pay their spiralling bills."

British Gas blamed the increase on the soaring cost of wholesale gas, which it said was now 63% higher than last year and more than 200% above the levels seen in 2003. It said its residential energy business had lost money in the second half of 2005 because it had not passed on the full extent of wholesale price increases to its customers.

"The energy map is being redrawn with Britain now dependent on gas imports from Europe," the British Gas managing director, Mark Clare, said. He noted the European commission had said this week that the market was "seriously malfunctioning", while events in Russia had shown the degree to which energy markets were now connected.

Mr Clare pledged the company would do all it could to help those struggling with the increase.

"Our aim is to ensure that every vulnerable British Gas customer asking for help receives some form of assistance next winter. This could include help and advice with paying their bills and energy efficiency measures to make their homes warmer."

British Gas said it would provide winter rebate payments to 300,000 customers next winter, which would be worth £90 to customers who took both gas and electricity from the company. It added that a further 2 million customers who had signed up for price protection contracts would not be affected by the increases and that it was offering a new contract to allow dual fuel users to fix prices until 2009.

The Department for Trade and Industry acknowledged that the increases would make "very unhappy reading for households" but said retail gas prices were still the cheapest in Europe.

"Our priority has to be to make sure that the most vulnerable know that help is out there."

The government was spending £2bn a year on winter fuel payments to 8 million pensioners as well as spending £800m on improving outdated heating and insulation in low income homes, the spokesman said.

The energy industry regulator Ofgem urged consumers to consider switching supplier. "You can save a maximum of £191 if you switch from British Gas," said a spokesman.

Guardian Unlimited © Guardian Newspapers Limited 2006