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Can British Gas justify 7% price increases?

Pound coin on gas hob

Looks like we’re in for a long, cold and skint winter. Energy price increases are back with a vengeance – and today’s unwelcome news from British Gas will hit eight million of its customers.

It was back in July that we discussed whisperings of possible energy price rises here on Which? Convo.

Sadly, British Gas (BG) has now made those rumours a reality, joining Scottish and Southern Energy (SSE) in raising its standard prices.

SSE is increasing its gas prices by 9% from 1 December, while BG will raise gas and electricity prices by 7%. That means eight million BG customers on a standard or variable dual fuel tariff will face (on average) an extra £1.50 a week on their bills from 10 December – equivalent to an extra £78 a year.

Winter energy woes

These are the first standard price increases from the so-called ‘big six’ energy companies to hit existing customers for two years.

The company admits that rising energy prices will ‘come at a difficult time for many in Britain’ – jolly nice of them to remember. So why the increase? It’s putting the blame on a 25% rise in wholesale gas prices as well as rising ‘network charges and environmental obligations’.

Hmm, that will be little comfort for people already concerned about energy costs. As Which? Switch found, around half of Brits are worried about how they’ll afford their fuel bill over the colder months – and that was back in October before any price increases had even been announced.

There’s a bit of relief for the 300,000 low income customers on BG’s ‘Essentials’ tariff – the new prices won’t affect them until April 2011. Anyone on a fixed price tariff is also safe from the price rises, until those deals come to an end.

What can BG and SSE customers do?

Your best bet is to switch to the cheapest available tariff. But considering it takes an average of five weeks to switch energy suppliers, customers will need to act sooner rather than later to avoid a winter’s worth of higher rates.

We’re yet to hear what Eon, npower and Scottish Power has in store for their prices, while EDF Energy has committed to freeze its standard gas and electricity rates until March 2011.

Above all, remember that as a general rule of thumb, if you’re on a ‘standard’ tariff and/or don’t pay your bills by direct debit, there’s probably a cheaper option out there for you. The question remains, will higher prices force you to switch?

Comments
Guest

I wonder how much of our energy bill goes towards sales commission (which manifests itself in many different ways from the human canvassers to referrals by comparison websites)?
I have made at least £30 cash back per switch and up to £120 by switching on the internet. There is only one source for this money; the consumer.

Guest
Marjie C says:
13 November 2010

No they can’t. If they had passed on the full 40% price drop of wholesale gas to their customers over the last few years then it would be reasonable. But they didn’t. Instead they have made a profit out of us all, whilst keeping very quiet about the real cost of gas to them. But the moment that prices start to move upwards they become very vocal about what it’s costing them. It’s time that they realized that the public at large aren’t as stupid as they seem to think.

Guest
pickle says:
14 November 2010

I reckon Marjie C is right. Wholsale gas prices are relatively low – so a price rise is surprising. The only possible excuse is the cost of invcreasing gas storage – we have less storage capacity than most other countries.

Guest

Completely agree – and I read somewhere quite recently – Observer I think – that Transco (who look after the pipes and storage) are decommissioning ALL gasometers (gas holders) in the UK over the next 12 months. I don’t recall the article stating a reason for this, but where will we store any gas at all without them?
Cynical me thinks this means we will have to buy-as-we-burn from other countries, making us far more susceptible to gas price rises globally and also at much greater risk of running out of gas in a cold snap or when the countries supplying us have a cold snap and want to stop the export for a while.
Whichever way you look at it, they (the energy co’s) make a killing out of us and leave us vulnerable by their profiteering methods.

Guest

I remember a few years ago the wholesale price of gas plummeted to the point that they couldn’t even give it away. I didn’t see the energy companies pass on those savings to consumers then so, absolutely not, they cannot justify prices. I’m a SSE customer – I’ve switched before and I’ll switch again. It was a lot easier to do than I thought it might be.

Guest

I’m with Ecotricity for gas and electricity.

I’ll stick with them because they put ALL of their profit into building renewable generation schemes, even for gas now.

They track their price against the biggest supplier for the area (in my case currently npower) so I will watch the big six carefully, but I’m afraid I won’t switch as I’d rather pay more but know exactly where the profit is going (and approve of it) than make a temporary saving but know that there is still a hefty profit made from me and spent on I know not what and I might not like it if I did know.

Guest

Latest news is that Scottish Power has just announced price rises of 2% on gas and 8.9% on electricity. How many more to follow?…

Guest

oh, you’re joking?! that’s who came top of my switch list on November the 18th and I was ready to go with them (after getting my ‘loyalty’ bonus with SSE on the 19th 🙂 ) Does the SwitchWithWhich calculator take into account the new SP prices?

Guest

Hi fat sam, the calculator is currently being updated with the latest figures and they should be reflected from this Thursday. You can check the details on this page to see what changes have been made to the tool: http://www.which.co.uk/switch/news?filterOption=PRICE_ANNOUNCEMENT