British Gas bills to rise again

MORE than 1.1m customers deserted British Gas last year following its decision to hike prices. And those who haven't done so face more price rises later this year, the company admitted today.

Parent company Centrica said that it would have to put up prices later this year to protect profits if wholesale gas prices continued rising. They are already 25% higher than they were three months ago.

But it told This is Money that it was 'impossible' to say where forward wholesale prices are heading and new capacity could see them fall. City analysts, however, believe prices will continue to rise.

The company has increased bills twice since January last year. They rose 12.4% in September following a 5.9% hike in January. The increases came in the wake of sharply rising wholesale gas and electricity prices but further price increases are likely to see yet more British Gas customers switching to alternative providers of energy.

The group faces further loss of business if it puts up prices. It admitted today that it has already lost 382,000 energy customers since the beginning of this year.

Customers are likely to take a cynical view of the latest announcement. At the time of its annual results in February, which showed a 64% jump in profits at British Gas, Centrica insisted that it had 'no plans' to raise bills this year.

But ahead of the company's annual meeting in London, chief executive Sir Roy Gardner told shareholders that action had been taken to improve trading. He said: 'If wholesale prices stay at these levels, trading conditions will be more difficult in late 2005 and 2006 and an appropriate retail price increase will be necessary to maintain gross margin. Given the continued volatility, no retail pricing decision has yet been taken.

'Financially we have had an encouraging start to the year but the winter period remains uncertain for all energy suppliers in light of continued increases in forward wholesale commodity prices. We will continue to take all the steps we can to mitigate the impact on our customers but retail price rises across the whole of the industry cannot be ruled out.'