British Gas, a subsidiary of Centrica and one of the UK’s Big Six energy providers, announced its plans to impose an electricity price hike on September 15th of this year. The 12.5% increase will soon affect an estimated 3.1 million customers.
Centrica claims that this was a “difficult decision,” and pointed out that they have maintained the same prices for their customers since November of 2013, while other suppliers had raised theirs. According to Centrica, they made their decision due to increasing transmission and distribution costs along with government policy costs. “We are selling electricity at a loss and that is not sustainable,” explained Centrica’s chief executive Iain Conn.
Conn also explained that wholesale price changes had nothing to do with the hike. “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.”
Another change which consumers should expect, together with the looming electricity price hike, is the removal of their yearly dual fuel discount of £15. This change will affect British gas customers with conventional credit meters.
The government is not backing up Centrica’s claims that their policy costs are a legitimate reason for the British Gas price hike. According to the UK government, these costs are small and insignificant. The Department for Business, Energy and Industrial Strategy expressed concern about the effect that the price hike will have on those already not getting a great deal.
They said: “Energy firms should treat all their customers fairly and we’re concerned this price rise will hit many people already on poor value tariffs.
“Government policy costs make up a relatively small proportion of household energy bills and cannot explain these price rises.”
Former Lib Dem leader Tim Farron argued that: “This is a colossal increase that will really hurt customers already struggling with rising prices due to the deteriorating economic situation.
“As a former public utility, British Gas has a huge number of customers who don’t switch and is clearly treating these people like cash cows.”.
Farron sees the lack of competition in the energy market as one of the reasons why companies such as Centrica are unstoppable when it comes to proposed electricity price hikes. He worries about people whose incomes will not be enough to afford heat and lighting costs when the winter season arrives.
Mark Hodges, Centrica Consumer chief executive, defended the company by saying that it first exhausted all efforts to maintain sustainable industrial operations before deciding to roll out the price hike. Hodges continued by reiterating that British Gas had been the last among many electricity suppliers to have a price hike.
The decision to increase British Gas’ electricity prices is also based on their competitors having all done the same in recent months. Hodges said that it was no longer sustainable for their company to hold back any plans for an electricity price hike.