GAS bills are set to soar this autumn after Centrica, the owner of British Gas, said that it was seeing unprecedented rises in the cost of wholesale gas.
Phil Bentley, Centrica’s finance director, said that gas bills were likely to rise by significantly more than the 12 per cent increase imposed by British Gas last year. “We’re talking about price rises that no-one has seen or done before.
“We thought 12 per cent was pretty racy last year and it’s fair to say it will be more than that,” he said.
City analysts say that the latest price increase will prompt hundreds of thousands more households to switch suppliers. British Gas has lost 1.2 million customers since August, when it was the first energy retailer to raise prices.
Customers are leaving at a rate of 10,000 a week, sharply down from 22,000 a week in May. But analysts say that the next round of price increases will be substantial and could inflict more damage on British Gas’s market share.
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A spokesman for Centrica refused to say how high the autumn price rise was likely to be. “The current wholesale market is very volatile and for that reason no decision has yet been made on consumer pricing,” he said.
Centrica has upstream gas assets but these are not sufficient to provide for all its 17.2 million customers. It has to buy about three quarters of its gas from other suppliers and the forward market for gas for winter has doubled.
“A greater proportion of profits will be earned from the upstream division as a consequence of higher wholesale prices,” the company said.
The spokesman for Centrica said that the group was forbidden from using its upstream profits to cross-subsidise the British Gas retail business.
“Within British Gas our pricing has to reflect market costs. We can’t engage in predatory pricing against our rivals that have less fire power than us,” he said.
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The company also said that it would hand back £500 million to shareholders, on top of an earlier share buyback of the same amount. Centrica shares closed up 8½p at 232½p. The group has been looking to buy or invest in upstream gas assets including LNG facilities and pipelines. However, all the assets that have come to the market have been fiercely fought for and have sold for prices that Centrica says were untenable.
The gas group also announced yesterday that it had bought Belgium’s largest power generator in a joint venture deal with Gaz de France. It is understood that the acquisition of SPE will cost Centrica about £96 million, for which it gains 51 per cent of the company, which is worth about £500 million.
Together with Centrica’s acquisition of Oxxio, the Dutch energy supplier, this month, the gas group now has some two million customers in what it considers to be key European markets, which are about to open to greater competition.
Centrica said that first-half profits at British Gas would fall short of the £274 million reported a year ago because of customers deserting to rival suppliers. But its overall expectations remained unchanged due to a strong performance in its gas production business.
Mark Clare, managing director of British Gas, said that record wholesale gas prices meant that all energy companies were having to consider the possibility of price rises for customers.