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British Gas Confirms Big Price Rises

(c) Sky News 2012

Millions of families are facing an average 6% jump in their household energy bills after British Gas confirmed increases to its gas and electricity prices.

The Centrica-owned company's decision means the average British Gas annual dual-fuel bill will go past the £1,300 mark - rising by £80.

It blamed higher wholesale prices and the rising cost of updating the National Grid (LSE: NG.L - news) network but consumer groups warned the increase would throw households' already stretched budgets into "turmoil".

British Gas is the second of the so-called "big six" to increase its charges before the winter.

It had warned in May that its costs were rising, with wholesale gas prices 15% higher and other charges set to add about £50 to the cost of supplying households.

Rival SSE is due to increase its tariffs by 9% on average from Monday, hitting about five million electricity customers and 3.4 million gas customers.

Of the others only E.ON have pledged not to raise prices for the remainder of 2012.

Npower, EDF Energy and Scottish Power have not made any promise that they will not increase prices by the end of the year.

British Gas last raised its prices in August 2011 when gas prices increased by 18% and electricity prices rose by 16%.

This was followed by a drop of 5% in electricity tariffs in January when wholesale prices eased. But firms have long been accused of being quick to raise prices but slow to bring them down again as they protect profits.

There was outrage in July after British Gas announced a 23% surge in profits. The company admitted that the previous year's price rises helped it rack up operating profit of £345m in the first half of 2012.

It has claimed that the impact of steep rises in bills over the past three years has resulted in consumer costs rising in line with inflation only for those who have taken advantage of a range of energy efficiency measures.

The company said it had helped such customers' gas costs fall by as much as 40%. It has announced further measures, including free loft and wall cavity insulation.

It also launched a new tariff that fixes prices for a year at its new levels but guarantees that should standard prices fall, customers' prices will fall by the same amount.

British Gas managing director Phil Bentley said: "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."

But its arguments were largely dismissed by consumer groups.

Ann Robinson, director of consumer policy at uSwitch , said the increase would leave many households facing a winter where they are "scared to turn on heating for fear of the cost."