British Gas hits customers with biggest one-off increase in energy bills ever recorded

Households have suffered the single biggest increase in their energy bills ever recorded, after British Gas raised its gas prices by 35 per cent.

It is the biggest one-off increase that British Gas has ever levied, the company admitted, and means that most families are now paying £400 more a year for their energy than they were at the start of the year.

The company, which supplies energy to nearly half of all households in the UK, raised gas bills by 35 per cent and electricity bills by 9 per cent with immediate effect.

It means dual fuel customers – those that take both gas and electricity from the company – will see their bills increase by 25 per cent to £1,317, a £404 increase compared with the start of the year.

The price increases come just six months after the company increased its dual fuel bills by 16 per cent.

While it was widely expected that British Gas would put up its bills this summer, campaigners reacted with horror at the scale of the increase and warned that millions of consumers, including middle-class families, would struggle to afford the increase.

The price rises will further raise the cost of living, which for the first time in over a decade is now outstripping average incomes, according to official figures.

The company, which supplies energy to 12.5 million households, said it was forced to act because of the soaring price of gas on wholesale market. It added that it was now losing money from supplying residential customers.

However, it is expected to come under fire when its parent company, Centrica, reveals a healthy set of profits thanks to its wholesale gas business, which owns gas fields in the North Sea and which has benefited from the escalating prices.

This is likely to prompt trade unions to renew their calls on the Government to introduce a windfall tax on gas and oil companies, which will be used to help fund vulnerable consumers' energy bills.

Tim Wolfenden, energy expert at price comparison website uSwitch, said: "Consumers will understandably want to know why they are suffering from unprecedented bill increases, when the parent company is still making good money."

A spokesman for British Gas said: "We need each business to make profits, otherwise they can not invest for the future."

While Centrica customers have been hit by a 44 per cent increase in their bills this year, the shareholders have suffered far less, with its shares dipping by less than 10 per cent since the start of the year.

On Wednesday they increased by 8.25p to 318p on the announcement of the bill increases.

The price rises – which have now seen energy bills more than double over the last four years – will hit pensioners hardest, campaigners said.

Elderly people tend to spend a far greater proportion of their income on heating than the overall population.

Gordon Lishman, director general of Age Concern, said: "These price rises are a hammer blow for vulnerable groups, including thousands of pensioners, who have already seen their energy bills rocket far above the realm of affordability.

"It is absolutely unacceptable that around 2.25 million pensioner households are now living in fuel poverty, and thousands more will soon be facing the same fate."

Households are defined as falling into fuel poverty when they are forced to spend 10 per cent of their disposable income on heating and lighting their home.

More than four million households are already estimated to suffer from this predicament. British Gas said it was not increase the amount it charges the 340,000 most vulnerable customers on its "essentials tariff".

Charities pointed out that it was not just the vulnerable that would be hit, but many middle-class families, already feeling the pinch from soaring food, mortgage and transport costs would be unable to cope.

Elizabeth Finn Care, which gives aid to professionals that fall on hard times, said that it had already given out a 53 per cent more grants to help pay for energy bills than a year ago.

"These latest rises announced by British Gas will only add to the numbers of people from previously comfortable, professional backgrounds contacting us for help," said Rebecca Ward at the charity.

According to official statistics, the average household income totals £27,370 after taxes.

This means that the average family is having to hand over 5p in every £1 of its take-home pay to heat and light their home, after British Gas's latest announcement.

The company's increases follows a similar move by EDF last week, which increased its customers' bills by 20 per cent on average.

The four remaining major supplies – npower, e.on, Scottish Power and Scottish and Southern Energy – are all expected to follow suit in the coming weeks.

The one glimmer of brightness for consumers was that British Gas promised it will not increase its bills again before the end of the year.

Most energy experts were expecting a further round of price increases this winter. However, while the company made it clear it would try its hardest its hardest to delay a price increase until well into 2009, most experts believe a further increase at some stage year is inevitable.

Adam Scorer, director of campaigns at energywatch, the consumer body, said: "High prices seem hard-wired into this market for the foreseeable future."

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