Heating and Ventilating

British Gas' electricity and gas prices have increased by 15%, with immediate effect, the company announced today.
The Centrica-owned UK supplier blamed rises on wholesale gas and electricity markets, driven up by soaring energy prices in the second half of 2007.

In the last six months of 2007, the firm said higher wholesale gas prices had reduced British Gas' operating margins to around 1% and at current wholesale prices would be loss making in 2008 without the increase.

The wholesale prices of gas and coal, the fuels used to fire three-quarters of the plants producing the UK's energy, have both more than doubled in the past year. Government initiatives to reduce emissions have added to bills.

Ofgem said the costs of meeting the government's emission reduction targets made it harder for energy suppliers. According to the regulator, costs from carbon credits that power companies are forced to buy to meet their pollution caps translates to a £31 per year addition to the average bill. A government initiative to force suppliers to install more efficient appliances in customers' homes and create greater efficiency adds another £38, while requirements for more renewable power sources adds another £20.

nPower and EDF Energy were the first two companies to increase their rates this month. Scottish & Southern, ScottishPower and E.ON are expected to follow suit.

Since British Gas reduced its retail gas prices by 20% in the spring of 2007, wholesale energy prices have risen sharply and the forward gas price for 2008 has increased by 51%, and the forward electricity prices by 61%.

Phil Bentley, managing director, British Gas, said: 'As the UK's biggest buyer of gas, we want lower gas prices. However, lower availability of supplies from both the UK and the continent coupled with higher global oil prices have forced up wholesale prices. We can't absorb the burden of these higher energy prices and the costs of delivering a cleaner environment'.