Household energy bills look set to rise next year after British Gas owner Centrica warned of a “difficult environment” for power companies in 2008.
Wholesale gas prices are on the rise and this will inevitably feed through to domestic bills early in the New Year, said analysts.</p>
<p>In a trading update yesterday, Centrica, Britain’s biggest energy supplier with 16m customers, said that it was “monitoring” the wholesale gas market to see whether it needs to increase prices. Wholesale gas for delivery in the first three months of 2008 is now 56p a therm, up 43pc on the same period for 2007.</p>
<p>”We expect Centrica to raise prices early in the New Year. The other suppliers are very likely to quickly follow Centrica’s lead,” said energy analysts at the investment bank Citigroup. The increased cost that suppliers are paying for their gas will erode margins unless they pass on the rise to customers.</p>
<p>Centrica’s trading statement said that British Gas would still be profitable in the second half but added: “Looking forward, the high wholesale prices will, if sustained, create a more difficult environment for retail energy suppliers in the UK going into 2008. We will continue to monitor this with regard to future pricing policy.”</p>
<p>Higher gas costs increase electricity prices because about 40pc of Britain’s power is produced in gas-fed generating stations. Last month the Bank of England warned about the impact on inflation of rising energy prices after crude oil reached a record $99.29 a barrel.</p>
<p>E.ON, the UK’s third-biggest energy supplier after Scottish & Southern Energy, said that it doesn’t currently plan to change its prices. “We buy gas in advance to protect customers from price volatility. We continue to monitor the wholesale price to remain competitive,” said an E.ON spokesman.</p>
<p>Allan Asher, chief executive of gas and electricity watchdog Energywatch, said: “Gas is abundant; there is no scarcity or shortage of gas, so there should be absolutely no need for its price to rise.</p>
<p>By Russell Hotten, Industry Editor
The Telegraph
<a href=”http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/12/15/cngas115.xml”>http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/12/15/cngas115.xml</a></p>
