Millions of British Gas customers have been urged to consider switching suppliers for a better deal after the energy giant announced record bill increases yesterday.

The company said gas bills would soar by 12.4% and electricity by 9.4% to compensate for higher wholesale prices.

Yesterday's rise is the second of the year by British Gas, following a 5.9% increase in January.

Critics attacked the scale of the increases and warned vulnerable customers would be hit hard.

Jennifer Evans, from price comparison website uSwitch.com, urged the 18.4 million account customers with British Gas to consider switching supplier for a better deal.

But she added: "We have already seen a couple of other suppliers implement their second price rise of the year, but when British Gas announce an increase the rest normally follow suit."

The increases mean gas customers will see their bills rocket by almost one-fifth in less than a year.

Analysts say the latest increase, due to take effect from September 20, will add £99 to the annual bill for a family of four who buy both their gas and electricity from British Gas.

British Gas said the increases, its highest since the market was opened to competition in the mid 1990s, were due to record wholesale gas prices.

Mark Clare, managing director of British Gas, said: "Depletion of North and Irish Sea gas reserves, the UK's consequent need to import larger volumes of gas and high oil prices are pushing up wholesale prices.

"The era of cheap UK energy is over."

The company said it understood some people could be hurt by the increases and has pledged £10 million to set-up a fund to assist vulnerable customers who need help paying their bills.

Allan Asher, chief executive of gas and electricity watchdog Energywatch, criticised the increases, calling them "a body blow to consumers."

He said: "This price rise is going to add millions to bills and expose many thousands of households to the risk of fuel poverty.

"We can welcome the move to set up a fund to help consumers in difficulty of paying for their energy, but overall this is seriously bad news for millions of consumers.

"It is no surprise that British Gas have responded to the rising wholesale cost of gas. But it is by no means clear why the wholesale price is so high."

Energywatch said it would be calling for an investigation into the wholesale market.

Former energy minister Brian Wilson said the latest price increases demanded an urgent rethink of Britain's proposed reliance on imported gas and the role of the regulator, Ofgem.

He said: "Both within government and subsequently, I have been warning about the extreme short-termism of the policies being pursued by Ofgem."

British Gas residential reported profits up 35% to £228 million in the first half of the year.

However, a spokesman claimed the company was likely to have made a loss in the second half of the year without the price increases.

Wednesday August 25, 2004