British Gas increases gas and electricity prices by six per cent
British Gas has begun notifying its customers that it will raise domestic gas and electricity prices by an average of 6% on 16 November 2012.
As a result, annual dual fuel bills for British Gas customers with average consumption will increase by around £80.
British Gas knows that this £1.50 per week average increase will be unwelcome news for customers, but the company is facing rising wholesale prices, as well as higher costs to upgrade the national grid, and to deliver the Government's policies for a clean, energy-efficient Britain.
British Gas is also increasing the help available to customers:
Loft and wall cavity insulation, which can each save the average household more than £100 per year, is available free of charge. More than seven million homes in Britain remain inadequately insulated. To help its existing energy customers guard against future rises, British Gas is launching a new tariff that not only fixes prices for a year at our new levels, but guarantees that should standard prices fall, customers' prices will fall by the same amount.
British Gas has the widest eligibility criteria for the Warm Home Discount – a £130 credit on the annual electricity bill given to customers who are elderly and most in need.
Customers who have taken advantage of the range of energy efficiency measures available have seen their gas consumption drop by as much as 40%. This is one of the reasons why British Gas customers’ actual bills have, on average, only risen in line with inflation over the past three years.
British Gas Managing Director, Phil Bentley, said: “We know that household budgets are under pressure and this £1.50 per week rise will be unwelcome. However, we simply cannot ignore the rising costs that are largely outside our control, but which make up most of the bill.
“Britain’s North Sea gas supplies are running out, and British Gas has to pay the going rate for gas in a competitive global marketplace. Furthermore, the investment needed to maintain and upgrade the national grid to deliver energy to our customers’ homes, and the costs of the Government’s policies for a clean, energy efficient Britain are all going up.
“We need an energy efficiency culture in Britain today; rising prices don’t have to mean rising bills. We are offering a huge amount of help to customers to help them cut the amount of energy they use and keep their bills under control.
"We're also spending more than any other energy company on people who need the most help."
Around 85% of costs behind the average dual fuel bill are largely beyond the control of British Gas. The company is making every effort to reduce its own operating costs, which are falling, while maintaining high standards of customer service. Unfortunately, these savings do not cover the other external cost increases the company is facing.
Despite the increase in prices announced today, assuming seasonally normal weather conditions, British Gas Residential profits in the second half of 2012 are expected to be around 15% lower than for the same period of 2011.
Phil Bentley added: “Even after this increase, our margins after tax in 2012 will only be 5p in the pound – a similar level to last year and lower than the prior year. Unfortunately, we cannot run our business sustainably on lower margins and still make the investments in jobs and future energy sources that Britain needs, especially if the country is to grow its way out of recession.”
Why prices are rising
North Sea gas supplies are running out. British Gas now has to buy gas in a competitive international market, and pay the going market rate – which continues to rise. Prices in the wholesale market for gas this winter are around 13% higher than those paid to secure gas for last winter.
There are other costs behind energy bills, and these are also increasing. Britain’s national grid requires a major upgrade, which is being funded through energy bills, and the costs of the Government’s policies that will ensure a clean, energy-efficient Britain, are also rising. Together, these have added around £50 to the cost of supplying the average customer’s home this year, and are expected to add nearly £60 to the cost of supplying the average customer’s home next year.
Help for customers to keep their bills down
British Gas knows that this is a difficult time for customers, which is why it is increasing its help for customers to keep bills down as much as possible. British Gas offers a range of free help to improve the energy efficiency of customers’ homes – including free loft and wall cavity insulation to those homeowners with little or no insulation, which can each save the average household more than £100 per year. British Gas is offering:
Free insulation provided and installed by British Gas, which would typically cost up to £350 per measure
Free scaffolding for insulation (if needed) worth up to £450
Free air vents (if needed) worth £100
Up to £150 to help with the cost of loft clearance for eligible elderly customers and those on certain qualifying benefits
Customers can access all the details of the help available at: britishgas.co.uk/cutmybills.
Offering peace of mind and protection from future price rises
For those existing customers who want to guard against future price rises, British Gas is also offering a new long-term fixed price tariff at no extra cost – Fix and Fall November 2013 – which guarantees not only that customers’ prices won’t go up in this period, but that if British Gas’ Standard Tariff falls during the contract, their prices will be cut by the same percentage too.
Extra help for customers who are poor, elderly and most in need
British Gas has set the broadest criteria of any major supplier to help as many customers as possible qualify for the Government’s Warm Home Discount, a credit of £130 towards winter electricity costs, which will be paid by April 2013.
Next steps for direct debit customers
Customers who pay by direct debit do not need to contact British Gas. British Gas will calculate any necessary changes and will not change the amount a customer pays without writing to them first.