British Gas hikes gas and leccy prices

The UK's biggest domestic energy supplier has increased its prices by 6%, adding £80 to the average dual fuel bill.

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Last Updated: 06 Nov 2012

It seems British Gas has a burning desire to make more money from consumers as it today defended an increase in tariffs that will add around £80 to the average household fuel bill. Of course, the firm’s managing director, Phil Bentley, was quick to let the media know that he blames it on rising costs which are ‘largely’ outside of the company’s control. He said: ‘Britain’s North Sea gas supplies are running out, and British Gas has to pay the going rate for gas in a competitive global marketplace.’ Some comfort to the ‘squeezed middle’ households of Britain.

So what are the reasons? Bentley explained that the company is facing rising wholesale prices, higher costs to upgrade the national grid, and increasingly burdensome clean energy requirements from the government: £50 of the increase will be spent on these elements. The rest of the increase will cover the higher wholesale cost, operating costs and, ahem, profit. Yeah, we thought that word might be in there somewhere.

The price increase will come into effect on 16 of November, just in time for the colder and darker nights that will require more heat and light. The firm was kind enough to predict that the annual dual fuel bill for its customers (on normal consumption) will be £1,238, and that 8.5 million UK households will be affected by the tariff changes. Luckily, you’re safe if you’re on a pre-existing fixed-price agreement. But of course, once that contract is up, you’ll have to start a new contract, presumably with higher prices attached. 

You might be wondering if there’s anything that can actually be done to slow the inexorable rise of fuel costs? Well, the energy secretary Ed Davey has told the Times that he is to propose a new loophole which could allow energy companies to dodge government emissions targets as long as other sectors are cutting emissions through technologies which work better for them than for fossil fuel companies. Gas companies will always burn gas, but a car factory may convert totally to wind or tidal power, reducing UK industry’s net carbon emissions. Furthermore, such a loophole would create scope for dozens of new gas power stations to be built across the UK, pushing down the price of energy. 

A better solution would be large scale gas storage - buy it in summer when it's cheap, pump it into the ground, and then pump it out again in the winter to keep seasonal changes in price to a minimum. But price volatility suits big energy companies because they prefer excuses to raise prices which never come down as quickly as they went up.

Anyway, with a machine as large and unwieldy as government, the traverse from words to actions could take a decade (or longer). So don’t expect falling energy prices any time soon…

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