British Gas hits customers with 12.5%

British Gas has announced it is to hike its electricity tariffs by 12.5% in September in a move affecting 3.1 million customers.

The Big Six energy giant confirmed the price rise, which will take effect on September 15, after a blunder on Monday saw the group mistakenly publish an incomplete statement about increasing electricity tariffs on its website.

Centrica-owned British Gas said the price rise is its first since November 2013 and the group pledged to help protect more than 200,000 vulnerable customers from the increase.

The group said it will give more than 200,000 customers receiving a warm home discount a £76 credit to offset the tariff increase.

Details of the increase comes as British Gas owner Centrica posted half-year results revealing that earnings from its consumer business plunged by more than a quarter after it lost 377,000 UK customer accounts in the first half.

Underlying operating profits from its UK home energy supply arm tumbled 26% to £381 million as the group said it was also hit by warmer than normal temperatures and the pre-payment tariff cap.

Centrica’s overall underlying operating profits were 4% lower at £816 million for the six months to June 30.

The group said it held off from the price rise a for “up to six months longer than some of our competitors”.

The price hike will mean an average dual fuel bill for a typical annual household tariff will rise by £76 to £1,120 - a 7.3% increase, according to British Gas.

British Gas is the last of the Big Six providers to increase prices after it promised in December last year to freeze tariffs until August.

The group insisted its overall electricity costs had increased by 16% since 2014.

But the move flies in the face of the Government, which made a pre-election pledge to introduce a price cap, although that has since been watered down to cover vulnerable households only.

Iain Conn, the chief executive of Centrica, told BBC Radio 4’s Today programme that while the commodity price of electricity had come down, it was facing “significant cost pressure” on transmission and distribution, as well as costs associated with Government policy.

He added: “The net effect of both of these is an increase of about £62 on the average bill, and that is the main driver of the increase, combined with the fact that our electricity prices at British Gas have been some of the cheapest in the market, and actually we’re now selling our electricity at a loss, which is clearly not sustainable.”

Mr Conn went on to say the energy market “does need to be and could be reformed”, but warned a price cap would reduce competition.

“We’re actually proposing that the Government are even bolder and instead of capping standard variable tariff, they should reform it so that it’s removed altogether so that contracts that don’t have any end are actually phased out and that the level playing field is created so that all suppliers pay the Government’s costs,” Mr Conn said.

“Currently only the large suppliers pay these, and we don’t think that’s good for the market.”

A spokeswoman for the Department for Business, Energy and Industrial Strategy said: “Energy firms should treat all their customers fairly and we’re concerned this price rise will hit many people already on poor-value tariffs.

“In response to a letter from the Business and Energy Secretary asking what action the regulator intended to take to safeguard customers on the poorest value tariffs and the future of the standard variable tariff, Ofgem has committed to taking prompt action, in consultation with consumer experts, to develop proposals including a safeguard tariff.

“We want to see rapid progress on this commitment.”

The Government also says its policy costs make up a relatively small proportion of household energy bills and cannot by themselves explain price rises announced by energy suppliers.