- Rui Vieira/PA Wire/PA Images
LONDON – The government rejected British Gas’ claim that its policy is forcing the company to raise electricity prices and said it is concerned that the price rise “will hit many people already on poor-value tariffs.”
British Gas announced on Tuesday it is raising electricity prices by 12.5% for 3.1 million of its UK customers from September. It is the first rise in electricity prices from the energy provider since November 2013
British Gas owner Centrica accidentally leaked the plans on its own website on Monday evening.
The price hike “reflects the increasing costs of energy policy, and delivery to customers’ homes since 2014,” British Gas said in a statement on Tuesday morning. “In that time, overall electricity costs have increased by 16%.”
But the Business, Energy, and Industry Strategy Department rejected British Gas’ reasoning for the price rise. A spokesperson said in a statement: “Government policy costs make up a relatively small proportion of household energy bills. Wholesale prices are the bigger portion of household bills and are coming down.”
The spokesperson added:
“Energy firms should treat all their customers fairly and we’re concerned this price rise will hit many people already on poor-value tariffs.
“The Business and Energy Secretary has written to Ofgem asking what action the regulator intends to take to safeguard customers on the poorest value tariffs and the future of the standard variable tariff.
“In response, Ofgem has committed to taking prompt action, in consultation with consumer experts, to develop proposals including a safeguard tariff.
“We want to see rapid progress on this commitment and are ruling nothing out.”
Theresa May attacked Npower’s planned 15% price hike as “shocking” earlier this year and announced plans for an energy price cap in May. However, her government has taken no action since June’s snap election.
British Gas’ price hike follows a price freeze announced in February that it said would last until August. British Gas said the increase will add £76 to the typical annual bill of a household on its dual fuel standard tariff, taking it to £1,120. Customers can fix their energy price until August 2019 on a specially discounted deal, Home Energy Secure, which will cost £1,107 per year, British Gas says.
While 3.1 million customers will be hit by the price rise, British Gas owner Centrica says 5.3 million people will be unaffected. 200,000 vulnerable customers are being protected from the increase.
Centrica Consumer CEO Mark Hodges says in a statement:
“We held off increasing prices for many months longer than most suppliers in order to protect our customers from rising costs, so it is a difficult decision to have to announce an increase in electricity prices. This rise reflects an underlying increase in policy and transmission costs.”
Centrica Consumer also on Tuesday reported a 20% fall in operating profit in the first half of the year “predominantly reflecting the impact of warmer weather on consumption in UK Home and a reduction in the number of energy supply and services accounts.” Group revenue was up 7% to £14.3 billion and adjusted operating profit was down 4% to £816 million.