More than three million British Gas customers will see their electricity bills go up by 12.5% from 15 September.
Energy giant Centrica confirmed the end of its long-standing price freeze after it mistakenly published an incomplete statement about the price hike on its website on Monday.
It said gas prices would not be going up. This means the average annual dual fuel bill for a typical household on a standard tariff will rise by £76 to £1,120 – an increase of 7.3%.
Centrica-owned British Gas said the price rise was its first since November 2013 and that it would give a £76 credit to more than 200,000 vulnerable customers to protect them from the increase.
Pre-payment metre customers are not affected by the price hike.
Research suggests that British Gas should be cutting bills, not putting them up, as the wholesale cost of energy has been falling.
Analysis of energy regulator Ofgem’s supply Cost index by collective switching site The Big Deal shows that since a peak in December 2016, the costs for energy companies have fallen by 9%.
Video: Centrica boss blames rising costs
But British Gas chief executive Mark Hodges asserted “wholesale prices during the last 12 months have not gone down” and that the price hike was down to “cost pressures”.
He told Sky News: “We haven’t taken this decision lightly. We realise that 3.1 million people are affected. But we have in the end have had to respond, like many of our competitors to the underlying increases we have seen in electricity.
“Our costs have gone up over the past few years by around 16%, so in the end, despite our own efforts to try and keep our costs under control, our efforts to improve our service, we have just had to make this difficult decision.”
He would not be drawn on whether the firm expected to lose customers over the price increase.
“Customers do have choice. They can move to many other companies… and that puts the pressure on us, and that is why we don’t make decisions like today’s decision lightly. We are very thoughtful about the impact on our customers, and on the number of customers that we are able to serve,” he said.
Asked whether customers could see their prices go down in the future, he replied: “We always want to keep our prices as low as possible… so any opportunity we have to either reduce our own costs, or if the costs that we incur that we don’t control go down, of course we would consider passing that on as quickly as we can to our customers.”
Rising energy bills are squeezing households as inflation also bites through the increasing cost of food shopping – while at the same time latest figures show wage growth has been slowing.
@skysarahjane I haven’t had a pay rise in 4 years! British Gas increase will cripple me
— Debbie (@DebbieAnne2224) August 1, 2017
Time to switch from @BritishGas – we are the consumers, we still have choice. https://t.co/BgNrxVMDTF
— Lliana Bird (@LlianaBird) August 1, 2017
like to know the British Gas breakdown of ‘cost of delivery ‘ if infrastructure investment should be continually borne by users.Greedy
— Mongoose Perkins (@Bertiemufc489) August 1, 2017
Angry customers responded to the price hike on Twitter, with one writing: “I haven’t had a pay rise in 4 years! British Gas increase will cripple me.”
Another wrote: “Time to switch from @BritishGas – we are the consumers, we still have choice.”
One person tweeted: “like to know the British Gas breakdown of ‘cost of delivery ‘ if infrastructure investment should be continually borne by users.Greedy.”
Details of the change in tariff came as Centrica revealed it lost 377,000 UK customer accounts in the first half of 2017.
The group’s pre-tax profits dropped by 7% to £639m in the six months to 30 June, compared with £688m for the same period last year.
British Gas is the last of the “Big Six” energy firms to increase prices.
EDF hiked bills for the second time this year in April, putting a typical household’s gas and electricity costs for the year up by 8.5%, or £91.
Rival SSE sput up standard bills by 6.9%, while E.On set out an 8.8% hike, both from the end of April.
There have also been rises of 9.8% from npower and 8% from ScottishPower, which took effect in March, while British Gas bucked the trend with a price freeze until August.
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Source: Sky