Millions face fuel bill misery with increases of 17 per cent on gas and electricity


Last updated at 15:10 04 January 2008

Gas and electricity bills could soar by up to 17 per cent just as millions are relying on their heating over the winter.

The increases could add more than £130 to annual power bills and push 400,000 Britons into "fuel poverty".

The first of the "Big Six" power companies to unveil price rises will be nPower.

The German-owned firm, which has more than six million customers, will announce today that its tariffs are about to go up by around 17 per cent.

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City sources say the biggest supplier, British Gas, which has 15.8million customers, is preparing to push up prices by around 10 per cent.

Other power firms are expected to follow suit over the next few days.

The industry will blame rising wholesale gas prices for the increases. The price of gas is tied to oil, which broke through the $100-a-barrel mark this week.

But that will not console homeowners already struggling to cope with high mortgage costs, rising food bills and the soaring cost of petrol and council tax.

It will come as a particular blow to the millions of poorer Britons, including pensioners, who must choose between heating and eating during the winter.

The increases, which are likely to come into effect in February, could push annual power bills past £1,000.

The consumer body Energywatch criticised the industry for putting up prices when the cost of wholesale gas and electricity goes up, yet being slow to pass on any falls.

Chief executive Allan Asher said: "Consumers will be fearing the worst as companies prepare to raise bills. It is a real kick in the guts.

"The biggest danger to prices is the absence of meaningful competition among suppliers to keep bills down."

The British power industry is dominated by British Gas, RWE nPower, Eon, EDF Energy, Scottish and Southern Energy, and Scottish Power.

Historically, firms have waited for British Gas to alter prices before announcing their own changes. However, this time nPower will be the first.

An industry insider said: "nPower has been itching to increase its tariffs for some months.

"There is a suspicion in the industry that nPower made a mistake on its buying strategy and so is paying above the odds for gas and electricity.

"Some firms, including nPower, may even be supplying gas and electricity at a loss."

More than 3.5million households are described as being in "fuel poverty" - spending more than ten per cent of disposable income on heating and lighting.

This figure is estimated to increase by as many as 40,000 for every 1 per cent increase in power bills.

Assuming an average price rise of ten per cent, this would increase the number of people in fuel poverty by 400,000.

If the increase was as high as 20 per cent, the total would rise by 800,000.

Analysts at the French bank SociÈtÈ GÈnÈrale expect British Gas to raise household bills by 9.9 per cent for gas and 4.5 per cent for electricity.

Tim Wolfenden, of the price comparison website, said: "This could rapidly turn into price rise misery for consumers in 2008."

A spokesman for nPower refused to comment ahead of the announcement on prices.

British Gas said it is keeping the situation under review.