British Gas customers may face higher bills

British Gas customers may face higher bills

Centrica, owner of British Gas, today signalled that household energy bills may have to rise in the new year if gas prices in the wholesale market continue at current high levels.

The company said it expected British Gas Residential to be in the black this year but second-half margins had fallen as a result of higher wholesale prices.

"The high wholesale prices will, if sustained, create a more difficult trading environment for retail energy suppliers in the UK going into 2008. We will continue to monitor this with regard to future pricing policy," the company said.

Tim Wolfenden, head of home services at uSwitch.com, warned: "Although Centrica predicts a more difficult environment for all retail energy suppliers in 2008, it is still making a profit, but is saying that it isn't enough. British Gas has already started paving the way for across-the-board price rises by putting up the prices on its tracker plan."

Advertisement starts

---

---

Advertisement ends

Allan Asher, chief executive of gas and electricity watchdog Energywatch, said: "Gas is abundant; there is no scarcity or shortage of gas, so there should be absolutely no need for its price to rise.

"However, the season of ill will towards energy consumers now appears to be in full swing with today's warning of price rises from British Gas. Consumers must be despondent and fearing the worst as companies again look set to raise bills."

Last year wholesale prices were high at the beginning of winter but then fell sharply, allowing British Gas and other energy suppliers to cut their prices in the spring. This year, according to a Centrica spokesman, that slump in prices has yet to be repeated.

He said wholesale prices were being driven by a number of factors: mainland European suppliers sourcing gas in the more liberalised UK market; the high price of oil; and the presence of financial institutions and hedge funds seeking to take advantage of price volatility.

"It is impossible to know exactly where prices are going to go for the rest of this winter," the Centrica spokesman said.

He stressed that the issue was one of price rather than the availability of gas. "No doubt if we get a really cold snap, gas will flow. Supply is not the issue; it is the volatility of price."

Other energy suppliers said they were keeping a close watch on developments in the wholesale market. "We have no current plans to change our residential prices. We continue to monitor the market and will remain competitive," a spokesman for Eon said.

An RWE spokeswoman said the company was "monitoring the situation" and would seek to protect consumers "for as long as possible".

British Gas said its price cuts last March and April, which brought residential gas prices down by 20% and electricity bills by 17%, had helped it regain market share. The company, which lost about 250,000 customers in the early part of the year, said numbers were back at 16m.

Britain is not the only country facing the possibility of higher prices. Yesterday Gaz de France was reported to have asked the French government for permission to raise its state-controlled tariffs by 6.1%.

Guardian Unlimited © Guardian Newspapers Limited 2007