Energylinx News

September 9, 2005

British Gas increase domestic gas and electricity prices

British Gas, today announced it is to increase domestic energy prices. This follows recent moves by Powergen and EDF Energy.

The 14.2 per cent increase in gas and electricity prices takes effect from 19 September 2005 and comes on the back of record highs in the cost of wholesale gas driven by soaring oil prices and declining North Sea gas reserves.

An independent report from Global Insight 1 this week found each ten dollar per barrel increase in the price of crude oil gives rise to a 7 p per therm increase in wholesale gas prices or an extra £50 a year2 on the average domestic gas bill. Global Insight found that the oil-gas linkage resulted from non-liberalised markets in Europe and could cost the UK an additional £10 billion in 2006.

The current forward price of gas for the second half of 2005 is 50 per cent above the same period in 2004 and 31 per cent above the market price for the first half of 2005. For electricity, it is 61 per cent and 43 per cent higher respectively.3 British Gas is not fully passing through these higher commodity costs in this price increase as it continues to try to mitigate the impact on customers, including an intense focus on driving down operating costs.

Amid concern about the impact of rising energy costs on the fuel poor, British Gas will be offering support to a quarter of a million of its most vulnerable customers through a rebate4 of up to £60. For the average customer, this will offset the impact of the price increase this winter. This is the biggest single social initiative carried out by any UK energy company. It comes on top of the existing £10 million British Gas Energy Trust Fund which is helping customers in debt who need financial assistance to pay their bills.

The one million customers who signed up to the British Gas Price Protection, which caps energy prices until 2007, will not be affected by the price increase until April 2007. British Gas is now launching a further fixed price product, enabling dual fuel customers to fix their energy prices until 2010 at no extra cost5. The increases will also not effect the range of "Discounted Electricity" tariffs, as these will be capped until 1 January 2006.

Mark Clare, Managing Director, British Gas, said: We are no longer an energy island - spiralling world oil prices are now having an unprecedented impact on the cost of gas as the UK is now dependent on imports. In these difficult times it is more important than ever that our customers take action to save energy and so reduce their bills. British Gas already invests £130m a year in energy efficiency measures for customers and we will now offer additional incentives for those that are prepared to take action. We are also offering a winter rebate to offset the cost of this increase to our most vulnerable customers who would otherwise be hit hardest.

Looking forward, British Gas warned that European Union member states must urgently open their markets if UK consumers were not to suffer even higher prices. Most major gas pipelines and storage facilities on the Continent are owned by monopolies or near monopolies and are in practice inaccessible to UK suppliers wishing to transport gas across Europe.

With average savings of over £150 available to customers transferring for the first time, Energylinx would recommend that everyone carries out a price check to ensure that they currently have the best deal available to them.

Energylinx offers its services for free and will take care of all of aspects of the transfer for you.

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These Energylinx calculators are unique in that they allow you to compare the prices of all energy suppliers.

Energylinx will arrange the whole transfer process for you, including notifying your existing supplier of any planned change and tracking the transfer to ensure that it occurs on time and accurately. Energylinx provides its services completely free of charge to the domestic consumer.

Notes to editors

Price increases are actual not averages and apply to all customers on all
payment methods.

1 Global Insight report - The UK gas market - impacts of interactions with the
wider European gas market. Global Insight stated: ‘The study reveals how limited
liberalisation in Continental gas markets could cost the UK Gas end-user as much
as £10 billion in 2006 (around half of the total value of the gas supply bill).
These costs predominantly arise because the lack of liberalisation has meant
that the pricing of gas on an oil-indexed basis across Europe has been
maintained, isolating the level of European gas prices from underlying supply
and demand dynamics. The study notes how a $10/barrel increase in the cost of
oil can increase the costs of European gas by around 7 pence / therm.’ Contact
Global Insight Media Relations on 020 7452 5183 for a copy of the report.

2 £50 based on annual consumption of 20,500 kWh, and 7p/therm = 0.2388 p/kWh,
giving £48.95 increase (1 therm = 29.3071 kWh).

3 On 5th September 2005 the average forward price for gas for the second half of
the year was 50 per cent above the same period in 2004 (41.27p/therm compared
with 27.56 p/therm) and 31pc above the market price for the first half of 2005
(41.27p/therm compared with 31.44 p/therm. For electricity it was 61pc (i.e.
£40.98/ Mwh compared with £25.53 /Mwh) and 43pc (i.e. £40.98/Mwh compared with
£28.68 /Mwh) respectively. Source: gas prices based on IPE data. Electricity
prices based on Spectron Data and Heren Data.

4 Provides two fixed winter discounts, totalling £40 for gas / £20 for
electricity in two instalments Nov 05/Feb 06. This will fully offset the
additional costs of energy against typical domestic consumption. A member of the
household must be in receipt of eligible benefits.

5 Provides peace of mind and security in a volatile market by providing the
customer a fixed price offering for gas and electricity until 2010. Electricity
is offered at a -4.8% discount and gas at a 2.8% premium against standard
prices. Customer taking both fuels at national average (20,500 kWh gas and 3,300
kWh electricity) and with gas representing 67% of total dual fuel bills, and
single rate electricity representing 33% consumption pays no additional cost.
Limited product offer, cancellation fee applicable. Excludes gas pre payment

Posted on September 9, 2005 at 11:44 AM