More than three million British Gas customers will see their electricity bills go up by 12.5% from 15 September – sparking a backlash from politicians and consumer groups.
Energy giant Centrica, which owns British Gas, said the average annual dual fuel bill for a typical household on a standard tariff will rise by £76 to £1,120 – an increase of 7.3%.
The company said gas prices would not be going up.
:: How the price hike will affect you
British Gas said the increase for electricity was its first since November 2013 and that it would give a £76 credit to more than 200,000 vulnerable customers to protect them.
Pre-payment meter customers are not affected by the price hike.
Research suggests that British Gas should be cutting bills, not putting them up, as the wholesale cost of energy has been falling.
Analysis of energy regulator Ofgem’s supplier cost index by collective switching site The Big Deal suggests that since a peak in December 2016, the costs for energy companies have fallen by 9%.
Video: British Gas boss blames rising costs
But British Gas chief executive Mark Hodges asserted “wholesale prices during the last 12 months have not gone down” and that the price hike was a result of other “cost pressures” from Government policies.
He told Sky News: “We haven’t taken this decision lightly. We realise that 3.1 million people are affected. But we have in the end had to respond, like many of our competitors, to the underlying increases we have seen in electricity.
“Our costs have gone up over the past few years by around 16%, so in the end, despite our own efforts to try and keep our costs under control, our efforts to improve our service, we have just had to make this difficult decision.”
“Customers do have choice,” he said. “They can move to many other companies… and that puts the pressure on us, and that is why we don’t make decisions like today’s decision lightly.
The Government responded by renewing its pre-election threat to impose a cap on standard tariffs following the conclusion of a continuing investigation of the charges led by the industry regulator, Ofgem.
A statement said: “Government policy costs make up a relatively small proportion of household energy bills and cannot by themselves explain price rises announced by energy suppliers.”
Higher bills add to the misery already felt by households as Brexit-linked inflation squeezes budgets at a time of weaker wage growth.
@skysarahjane I haven’t had a pay rise in 4 years! British Gas increase will cripple me
— Debbie (@DebbieAnne2224) August 1, 2017
Time to switch from @BritishGas – we are the consumers, we still have choice. https://t.co/BgNrxVMDTF
— Lliana Bird (@LlianaBird) August 1, 2017
like to know the British Gas breakdown of ‘cost of delivery ‘ if infrastructure investment should be continually borne by users.Greedy
— Mongoose Perkins (@Bertiemufc489) August 1, 2017
Angry customers responded to the price hike on Twitter, with one writing: “I haven’t had a pay rise in 4 years! British Gas increase will cripple me.”
Another wrote: “Time to switch from @BritishGas – we are the consumers, we still have choice.”
One person tweeted: “like to know the British Gas breakdown of ‘cost of delivery’ if infrastructure investment should be continually borne by users. Greedy.”
Details of the change in tariff came as Centrica revealed British Gas lost 377,000 UK customer accounts in the first half of 2017.
The group’s pre-tax profits dropped by 7% to £639m in the six months to 30 June, compared with £688m for the same period last year.
British Gas is the last of the ‘big six’ energy firms to increase prices.
EDF hiked bills for the second time this year in April, putting a typical household’s gas and electricity costs for the year up by 8.5%, or £91.
Rival SSE put up standard bills by 6.9%, while E.On set out an 8.8% hike, both from the end of April.
There have also been rises of 9.8% from nPower and 8% from ScottishPower, which took effect in March, while British Gas bucked the trend with a price freeze until August.