British Gas has announced plans to raise electricity prices by 12.5 percent from mid-September, affecting 3.5 million customers.
Customers have not responded well, saying they will switch energy providers. According to Centrica (LON:CNA), the rise is due to the transmission and distribution costs and the costs of government policy.
In response, the government said its policy costs “could not explain” these rises by British Gas.
“We have seen our wholesale costs fall by about £36 on the typical bill since the beginning of 2014 and that is not the driver. It is transmission and distribution of electricity to the home and government policy costs that are driving our price increase,” said Centrica chief executive Iain Conn on BBC’s Today Programme.
“We are selling electricity at a loss and that is not sustainable.” he added.
Shadow energy minister Alan Whitehead, also on the Today Programme, said that the government should have carried through their election promise of imposing a price cap on energy.
“It is really important now that energy prices are stabilised and we need a cap to do that,” he said.
“We also need action on the make-up of the customer base of energy companies. It clearly is not sustainable as far as customers are concerned being on mainly these standard variable tariffs, which land the greatest cost on the customers who can least bear it on a regular basis.”
Mark Hodges, Centrica Consumer chief executive, said: “We held off increasing prices for many months longer than most suppliers in order to protect our customers from rising costs, so it is a difficult decision to have to announce an increase in electricity prices.
“We are fully engaged in the debate over how to ensure the energy market works better for customers and have made a number of proposals to the government and Ofgem.
“These include phasing out the standard variable tariff and levelling the playing field so all suppliers pay a share of energy policy obligations. We also welcome and share Ofgem’s focus on vulnerable customers.”
Angry British Gas customers have taken to Twitter to say they will be shopping around for a better deal.
