British Gas most expensive gas supplier despite record profits

British Gas is putting prices up by 15% or £85 for gas and 15% or £54 for electricity.The price hike comes into effect immediately and will hit standard tariffs, potentially affecting over half its 16 million customer accounts and adding an extra £139 on to the average dual fuel customer’s household energy bill. Bills are now set to rise from £912 to £1,051.

The move comes despite British Gas reporting record half year profits of £533 million - almost £3 million a day and up by £676 million year-on-year – off the back of lower wholesale prices. According to Citigroup, British Gas’ projected 2007 year end profits are set to hit almost £639 million – more than six times the £95 million British Gas made in 2006. The projections suggest that, for residential supply alone, the giant will see its profit per customer increase fivefold from £5.93 to £39.92.

For British Gas customers it means further pricing misery after enduring a three year run of price increases when dual fuel bills rocketed by 85% or £513 (2004 – 2006). This came to an end last year when the giant dropped prices by 19% or £208. Today’s move completely wipes out last year’s decrease after only 8 months of lower prices and shifts British Gas back into its old position as Britain’s most expensive gas supplier.

However, customers are being warned to expect further price blows from the giant as British Gas recently indicated that it is considering regional pricing for gas – a ‘postcode lottery’ policy which will see consumers paying different prices for gas based on where they live in the UK.

If British Gas does introduce regional pricing for gas, other suppliers are likely to follow suit - some consumers can expect to pay close to £100 more for their energy compared with others living elsewhere in the country.

Ann Robinson, Director of Consumer Policy at uSwitch.com, comments: “Today’s inflation busting price hike will leave 16 million consumers wondering what this company has done to deserve their loyalty and continued custom in 2008. Last year, British Gas spent £53 million on advertising, convincing consumers that it had turned over a new leaf. Now it is getting back to what it does best – shoddy service, high prices and poor value for money.

“Today’s increase is the thin end of a wedge – British Gas has left the door open for a change in pricing policy that will see consumers paying different prices for gas based on where they live in the UK. If this ‘postcode lottery’ policy is adopted across the board by all suppliers then previous estimates that price rises would add an extra 15% or £150 onto household bills in 2008 could fall short.

“British Gas customers cannot afford to hang around. Unless they are already on a competitive online deal they should move to a cheaper plan today to protect their household from the impact of higher energy bills.”

British Gas’ pricing announcement comes only a day after the industry regulator – Ofgem – assured the Chancellor that it has no evidence that recent energy price rises are a result of industry collusion.

However, campaigners are calling for suppliers to justify sweeping price rises amid allegations that they are slow to pass on price cuts, but quick to put prices up. Energy prices soared across the board by £277 (38%) on average between 1st January 2006 and 1st January 2007, but prices were only cut by £101 during 2007, despite a 56% decrease in wholesale energy prices. While 15 price rises in 2006 added £4.8 billion to consumer energy bills, price cuts in 2007 only shaved off £1.7 billion.