British Gas raises electricity prices for millions of customers

British Gas has ended its self-imposed moratorium on raising energy prices and announced a hefty 12.5 per cent increase in electricity prices from mid-September.

"Gas prices are unchanged, but the average annual dual-fuel bill for a typical household on a standard tariff will rise by £76 to £1,120, up by 7.3 per cent," says the BBC.

The move affects around 3.1 million British Gas customers on the "standard tariff", the default rolling contract option.

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Around 5.3 million people are either on fixed deals or only buy gas from the firm, says The Times.

British Gas said it will protect 200,000 of the most vulnerable households who receive the government's "warm home discount" by crediting their account with £76.

That isn't saving it from criticism, however.

A government spokesperson told the BBC they want the regulator to press ahead with plans for a new price cap for vulnerable customers through a "safeguard tariff".

Shadow energy minister Alan Whitehead said the government "should have acted on its pre-election promise of imposing a price cap on energy costs".

Iain Conn, chief executive of British Gas's owners Centrica, blamed the increase on rising costs for electricity transmission and distribution networks, as well as green energy levies.

Despite a £36-per-customer drop in wholesale prices, the total cost of supplying energy has risen by £62-per-customer in the past three years, he added, saying the company was raising prices by more than that to recoup its losses.

Although the firm sold electricity at a 3.9 per cent loss last year, it made a 15.1 per cent margin on gas supply. Regulator Ofgem reckons a "fair" margin on energy supply is an overall 1.25 per cent.

Centrica's results today reveal profit for the first six months of the year fell four per cent to £816m, while underlying earnings on domestic fuel supply dipped 26 per cent to £381m.

That was blamed on the loss of 377,000 customers, a cap on pre-pay energy prices and unseasonably warm temperatures that reduced energy demand.

British Gas had been the only one of the so-called "big six" not to raise energy prices so far this year, after increases from SSE, Eon, Npower, Scottishpower and EDF.