British Gas today announced that, in response to record levels of wholesale gas prices, it is to raise residential prices by 12.4 per cent for gas and 9.4 per cent for electricity.
The new prices take effect from 20th September, 2004, and come at a time when the average wholesale price for gas in 2004 is up by 28 per cent on 2003, with forward prices showing a further rise of 25 per cent for 2005. In electricity, average wholesale prices for 2004 are 22 per cent higher than 2003 with 2005 up by a further 28 per cent.1
The new prices will mean an extra seven pence a day on electricity bills and 13 pence a day on gas bills for the average domestic customer 2. Allowing for inflation, UK gas and electricity prices are still cheaper today than when competition was introduced 3.
Mark Clare, British Gas Managing Director said: “The UK energy industry has never faced such high wholesale gas prices – looking forward the price for 2005 is more than 50 per cent up on 2003 prices. We have absorbed as much of these additional costs as we could, but unfortunately we now have to pass a proportion of them on to our customers.
“Depletion of the North and Irish Sea gas reserves, the UK’s consequent need to import larger volumes of gas and high oil prices are pushing up wholesale prices. The era of cheap UK energy is over but we have confidence that the investments we are now making in future energy supplies will, in the long term, put downward pressure on commodity costs for the benefit of all our customers.”
Clare added: “ We are clearly very sensitive to the impact these changes will have on customers. British Gas has pledged £10 million to set up an independent fund to assist those customers who need help paying bills. In partnership with Help the Aged, we have also developed a package to cap energy bills for vulnerable older customers. This will give them peace of mind that their electricity and gas bills will not increase over the next three years.” 4
Centrica, the parent company of British Gas, has already announced its intention to spend £4bn on securing new sources of gas and electricity for its British Gas customers as the UK moves to a position where approximately 75 per cent of its gas requirements will need to be imported by 2015 5.
In addition, Centrica has agreed long term supply deals worth almost £12 billion with Gasunie, Statoil and most recently a fifteen-year LNG deal with Petronas. These deals are already helping to underpin new infrastructure projects, including pipelines and LNG terminals to ship gas from around the world to the UK.