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British Gas Raises Gas and Electricity Prices

In a time of increasing fuel poverty, British Gas has sought to raise domestic gas and electricity bills by 7 per cent this winter.

The news will disappoint many customers who already feel that their energy bills are overpriced in the turbulent economic environment. British Gas has announced that the planned increase will take effect from the 10th December.

Affecting approximately eight million customers, the gas and electricity price increases will not, according to British Gas, affect its 300,000 most vulnerable customers – at least not initially. Vulnerable customers on the British Gas ‘Essentials’ package will not incur any change in rates until the 1st April 2011.

The announcement by British Gas follows similar news by Scottish and Southern Energy (SSE), which plans to increase its gas prices by 9.4 per cent at the beginning of December. British Gas has justified the increase on a 25 per cent increase in wholesale gas prices; however, the extent to which the energy company has increased its prices to maintain a healthy margin of profit remains unclear.

Although fuel bill increases are not uncommon in Britain, many domestic customers will be especially concerned about the costs of operating their central heating systems during the forthcoming winter.

The Department of Energy and Climate Change defines a household as experiencing fuel poverty if it is required to spend “more than 10 per cent of its income on fuel to maintain an adequate level of warmth (usually defined as 21 degrees for the main living area and 18 degrees for other occupied rooms)”. Fuel poverty has risen each year in the UK since 2004 and, in 2008, 4.5 million households were adjudged to be fuel poor in Britain.

Adam Scorer, of watchdog Consumer Focus, commented: “British Gas and other suppliers respond to forward energy prices and that will be their argument that price rises are needed. However, wholesale prices are around half of their peak in 2008 and yet in the same period customers prices were cut by less than 10 per cent”. Mr Scorer added: “Consumers will feel that suppliers did not make cuts when conditions allowed it, but are covering their profit margins as wholesale prices nudge up”.

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