Yahoo Finance British Gas raises prices for millions despite falling costs for the firm
Millions of customers will see their energy bills go up from 15 September after British Gas announced it will increase electricity prices by 12.5 per cent.
The move was announced by owner Centrica on Tuesday morning, but only after the company appeared to accidentally leak the plans on its own website on Monday evening. Centrica said the hike represents its first rise in electricity prices since 2013. It will affect 3.1 million customers in the UK. The company said it would provide credit to help protect more than 200,000 vulnerable customers from the increase.
MORE: Hard Brexit ‘will lead to 10% increase’ in car repair bills for British motorists
However, consumer collective The Big Deal denounced British Gas’s decision to raise prices, pointing to statistics from energy regulator OfGem which show that since a peak last December, costs for energy companies as a whole have actually fallen by 9% — due largely to a decline in external costs such as wholesale prices.
Ed Molyneux, head of research for the Big Deal, called the price rise “completely unjustifiable”.
“Their costs have actually gone down since they proudly declared their price freeze. They should be cutting prices not raising them.
MORE: British Gas planning to up energy prices by 9%
“British Gas can’t, on one hand, say they can afford to freeze prices and then when their costs drop they decide to increase prices. There must be no British Gas price rise. It would unfairly hit millions of ordinary families in the pocket while British Gas makes millions in profit and their executives take home millions in pay packages,” he added.
“If the government acted to bring in the price cap it promised this behaviour would stop.”
When Yahoo Finance asked British Gas to explain the disparity, the firm referred to the company’s press release claiming rising costs since 2014 were to blame for the rise.
In a company statement, Centrica consumer CEO Mark Hodges said: “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.”
The latest hike does follow a price freeze announced in February that British Gas said would last until August.
As part of that announcement, the company explained that it was able to maintain a price freeze “despite increases in external costs, because we have significantly reduced our own costs”.
British Gas said the price rise will add an extra £76 to a typical annual household fuel bill, a 7.3 per cent increase that will take the average bill to £1,120 a year.
MORE: ‘Significant’ financial stress putting 330,000 UK businesses at risk of going bust
The changes come as the company reported a four per cent year-on-year fall in adjusted operating profit to £816m since May, in line with analysts’ expectations. That comes after the loss of another 485,000 customers as consumers seemingly switch to smaller rivals that are often priced more competitively.
Matin Lewis of MoneySavingExpert said this amounts to a “catch-up hike” for British Gas.
“It was the only one of the big 6 firms not to raise prices at the start of the year, and now, as predicted, it’ll do it from September. And that means if, as is possible, we see another batch of rises this coming winter, its customers will feel like they’ve been price-slapped twice in rapid succession.”
MORE: Revealed: How much the biggest earners make in the capital, by industry
The government has yet to respond to the news, but is unlikely to welcome the hike in prices at a time when British consumers are already feeling the pinch. Prime Minister Theresa May pledged to introduce a cap on energy prices ahead of June’s election — adopting a policy the Tories had previously attacked when first introduced by then Labour leader Ed Miliband in 2015 — and threatened to intervene after what she termed a “shocking” price hike from nPower earlier this year.
OfGem also vowed to cap bills for some of the UK’s most vulnerable customers earlier this month. British Gas’s move follows a number of similar announcements earlier this year from EDF Energy, E.On, Scottish Power and nPower.
