British Gas announces 5.5% price rise

British Gas has announced it will raise its standard variable tariff (SVT) by an average of 5.5 per cent from 29 May.

The UK’s largest energy company blamed the increase on rising wholesale and policy costs including the smart meter roll-out and schemes to reduce carbon emissions.

“Why we’re increasing the price of our default tariffs”

The 5.5 per cent rise – which applies to both electricity and gas – will mean a typical dual fuel domestic customer on the SVT will pay on average £60 a year more.

The company called for the funding of all government policy costs to be paid for in a “fairer way”, such as through general taxation.

Commenting on the price increase, Mark Hodges, chief executive of Centrica Consumer, said: “We fully understand that any price increase adds extra pressure on customers’ household bills. This increase we are announcing today is reflective of the costs we are seeing which are beyond our control. We are not raising prices for 3.7 million customers, including those currently on fixed-term deals, on a prepayment meter or who are vulnerable.”

He insisted the company “continues to work hard” to reduce its own costs and keep its prices “as low as possible”. “We have seen other suppliers raise prices and Ofgem increase the level of the prepayment tariff cap largely due to increasing wholesale energy and government policy costs.”

“Government policies, intended to transform the energy system, are important but they are putting pressure on customers’ bills,” he added. “We believe government should level the playing field so the customers of all suppliers pay a fair share of energy policy costs We continue to encourage government to consider moving these costs out of energy bills altogether and into general taxation.

“We also continue to call on Ofgem to end the standard variable tariff across the market which would encourage customers to proactively seek the best energy deal for them. We’ve taken action to end our own SVT for new customers.

In November last year, British Gas became the third supplier to confirm it would scrap SVTs for new customers. It has introduced a 12-month fixed-term default “temporary tariff” for customers who don’t make a choice when their existing contract comes to an end.

The announcement came as part of a raft of measures the company believes could remedy failures in the domestic energy retail market, and which it claims are preferable to the introduction of the wide-ranging price cap proposed by government.

Victoria MacGregor, director of energy at Citizens Advice, said: “There are serious question marks over whether these price rises are genuinely justified.

“British Gas recycles Ofgem’s reasoning for recently increasing the prepayment meter price cap, saying that wholesale and policy cost increases are to blame for today’s price hikes. But today’s announcement will see affected customers paying on average between £47 and £72 per year more than the prepayment meter cap – even though it’s cheaper to serve customers who pay by cheque or direct debit.

“Today’s price rise re-emphasises the need for the Government to act quickly and bring in its cap on poor value default tariffs.”

In February, British Gas’ parent company Centrica announced the loss of 4,000 jobs in the face of stiff competition and the looming price cap on energy tariffs.

The number of household customer accounts for both home services and energy supply plunged by 1.725 million – or 7 per cent – to 24.4 million. This included the loss of 1.4 million energy supply accounts, corresponding to 750,000 customers.

Standard variable tariff price increases since Dec 2017

Source: Centrica