More price rise pain as British Gas puts prices up again

British Gas has become the second major energy supplier to announce a second price rise this year. The giant is putting its prices up again by 35% or £230 for gas and 9% or £37 for electricity coming into effect today. It means the average British Gas dual fuel bill will go up from £1,055 to £1,322 - an increase of £267. However, in total, customers will have seen an increase of 45% or £410 since the beginning of the year when the average British Gas dual fuel bill stood at £912.

British Gas has blamed its second increase on wholesale pricing pressures. But the writing has been on the wall for some time. Although it reported 2007 year end profits of £571 million, it recorded £533 million in the first half of the year. By the second half, profits had slumped to £38 million. The company responded by increasing its prices in January this year by 15% or £85 for gas and 15% or £54 for electricity made on 18th January, but that hasn't been enough to protect margins in the current market. British Gas residential profits for the first half of 2008 have plummeted by 69%.

All suppliers are expected to follow suit with a second wave of price increases. - industry insiders have been predicting further increases of up to 40% this year. This would take the average household energy bill up to a crippling £1,467. Spending on energy would account for 5% of the average household's net income. It would also mean an unprecedented 61% or £555 increase in the average household energy bill in one year. However an independent report, commissioned by Centrica, said that households could see gas bills alone rocket to over £1,000 ‘within the next few years'.

Ann Robinson, Director of Consumer Policy at uSwitch.com, says: "This is the second nail in the coffin for affordable energy in the UK - with every price increase we are edging closer to household energy bills hitting a record high. A potential £555 increase in one year will be a lot for households to absorb and will prove impossible for some. But the bigger obstacle will be making the longer term adjustment to paying far higher energy prices - there will be casualties along the way.

"Consumers should begin to make the adjustment now by cutting back on their energy usage and making sure that they are paying the cheapest available price for what they are using. This will help limit the impact of soaring energy prices bills."