30th Jul 2008 14:30
EMBARGOED TO: 14:30 Wednesday 30 July 2008 British Gas: Pricing Announcement -- Prices for dual fuel to increase by 25 per cent. -- Lower price increase of 21 per cent for dual fuel prepayment customers. -- Prices for electricity to increase by 9 per cent and gas by 35 per cent. -- No increase at all for 2.1 million customers on fixed price tariffs. -- Launch of Essentials Extra: no price increase for vulnerable customers until April 2009, saving up to £214 per customer1, plus a home energy audit and energy efficiency measures to help reduce energy consumption and cut future bills in a sustainable way. -- Nil premium fixed price tariff launched to guarantee prices until September 2011. -- Winter 2008/2009 wholesale gas prices up 89 per cent on the previous winter, which represents an increase in market commodity costs of around £2 billion. -- British Gas Residential profits for first half of 2008 down 69 per cent. -- Committed to no further price rises for standard tariff customers in 2008. British Gas today announced that soaring wholesale energy prices have forced itto increase tariffs for domestic gas and electricity. Wholesale gas prices for the coming winter have increased by 89 per cent on theprevious winter - up from 48.0p/th2 to 90.8p/th3. Wholesale electricity priceshave increased by 72 per cent - up from £49.62 MWh4 to £85.58 MWh5 over the sameperiod. The increase in wholesale prices is the result of: -- Diminishing UK gas reserves: the UK will import 40 per cent of its gas needs this year, up from 27 per cent last year. -- The UK is now buying gas in a global market: prices are strongly linked to record oil prices, which have doubled since spring last year. -- Increasing global demand: countries in all parts of the world, including fast-growing Asian economies, are attracting gas cargoes at oil-inflated high prices and thus the volume of gas shipped to the UK has fallen 60 per cent6. British Gas Managing Director, Phil Bentley, said: "We very much regret that wehave had to make this decision at a time when many household budgets are alreadyunder pressure. The simple fact though, is that we have entered an era ofunprecedented high world energy prices. The only answer to cope with higherenergy prices, I'm afraid, is for all of us to be more energy efficient and wewill be contacting all our British Gas customers to show how they can saveenergy to try and offset these price rises." The retail price increases, averaging 25 per cent or 72p per day for a dual fuelcustomer, come in with immediate effect. However, 2.1 million customers on fixedprice tariffs will be unaffected. British Gas has around 340,000 Essentials accounts and by holding prices flatuntil after the winter, those customers will save up to £2141. In the 12 monthsto April 2009 British Gas has committed to spend £43 million on support for itsEssentials customers - the most of all the six major energy retailers. British Gas has also launched Essentials Extra - a package of benefits that willallow its most vulnerable customers to control their energy bills on an ongoingbasis. Along with benefiting from a delay in the price increase until afterwinter, Essentials customers will be offered a home energy audit to identifymeasures that can be taken in their homes to cut consumption and bring down thecost of energy when prices rise after winter. Where suitable, British Gas willthen offer access to free energy efficiency measures such as insulation. Thispackage will help Essentials customers take control of their bills in asustainable way. This initiative is part of a broader programme of working with the Government totry to reduce the impact of soaring wholesale energy prices for the mostvulnerable customers. British Gas will also spend £900 million over the next three years installingenergy efficient products in customers' homes - the largest such initiative inthe UK. Its ongoing Green Streets programme is demonstrating that reductions inenergy usage of up to 30 per cent are possible through a mixture of expertadvice and energy efficiency installations from British Gas7. Furthermore, in2007 British Gas installed 17.3 million energy efficient products, helping morethan 6.4 million households save money, and 1.8 million people have completedBritish Gas' Energy Savers Report, recommending average savings of £172 perannum. To protect customers from the impact of wholesale market volatility, British Gasis today launching a new fixed priced tariff without a premium. Fixed Price 2011will offer customers the opportunity to fix their gas and electricity prices attoday's revised rates until September 2011. British Gas also confirmed thatthere would be no further price increases for standard tariff customers in 2008. Mr Bentley continued: "We're working hard to take costs out of the business andare on target to save £60m this year, but we can't absorb the impact of suchhigh wholesale prices, which are increasing the market costs of the energyprocured for our customers by over £2 billion. We will continue to do all we canto protect our customers from high prices. We are delaying the price rise forour vulnerable customers until after next winter, lowering the price increasefor prepayment customers, launching a new fixed price tariff and helping all ofour customers to make their homes as energy efficient as possible." "British Gas leads the industry in securing new sources of energy for the UK,from bringing in new gas supplies and building the world's largest offshore windfarm, to completing the first modern power station to be built in the UK foreight years. However, these investments are costing billions of pounds and wecan't sell energy at a huge loss." Along with rising wholesale energy prices, customers' bills have also been hitby increasing transportation and distribution costs and the cost of meetingGovernment targets for renewable electricity generation and carbon emissionsreduction, which have added £32 to the average dual fuel bill8. In line with the guidance given in the Interim Management Statement in May,operating profit for British Gas Residential in the first half of 2008 was £166million, down by 69 per cent from £533 million in the same period last year, apre-tax operating margin in the first half of 2008 of 4.3 per cent. Given current record forward wholesale prices for the coming winter, after thisprice increase British Gas Residential's operating margins in the second half ofthe year are forecast to be broadly in line with the first half performance. Notes to editors All bill increases for standard tariff at industry average annual consumption(20,500 kWh for gas, 3,300 kWh for single rate electricity), averaged across allregions and standard payment methods, rounded and including VAT at 5%. 1 Represents the average dual fuel saving for a Pay As You Go Energy Essentialscustomer versus otherwise increased rates for the months August 08 to March 09inclusive. Based on industry average annual consumption, using a seasonalprofile of consumption, averaged across all regions, rounded and including VAT. 2 Average of Heren and Argus: Average month ahead for winter 07/08 = 47.96p/th. 3 Average of Heren and Argus: Forward price for winter 08/09 as of close on 28thJuly = 90.83 p/th. 4 Argus: Average of winter 07/08 outturn prices = £49.62 MWh 5 Argus: Forward price for winter 08/09 as of close on 28th July = £85.58 MWh 6 Waterborne: The UK imported 1.413 million tons of LNG between 1 October 2006to 31 March 2007 in 24 cargoes. In the same period 2007/08 the UK imported589,000 tons on 11 cargoes - a difference of 58.3%. 7 IPPR - Green Streets: Analysis and policy implications - Initial Results (July2008). 8 Total annual costs incurred per customer for Transport & Distribution - £215,CERT - £32, ROC - £11. Based on a dual fuel customer at industry average annualconsumption, rounded and excluding VAT. Investor relationsCentrica: 01753 494000 Media relationsBritish Gas: 0845 072 8002 Copyright Business Wire 2008Related Shares:
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