British Gas hikes prices by 18%

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Energy giant British Gas last week announced price hikes of 18% on gas and 16% on electricity.

On average, the increase will add £190 to the typical customer’s yearly dual fuel bill when they come into effect on 18 August.

The price hikes will have come as little surprise to industry experts and consumers. In fact, it had been widely reported in the press that British Gas was poised to announce an increase in response to rising wholesale costs which have shot up following instability in the Middle East.

British Gas’ announcement comes a month after rival Scottish Power hiked gas prices by 19% and electricity by 10%. Historically, the Big Six energy suppliers have followed a herd mentality when increasing prices which means further price hikes might not be far away.

Act fast to cut costs

Under current legislation, energy companies must give customers at least 30 days’ notice of any increase in pricing. Nevertheless, you will need to act quickly to secure the cheapest possible deal on your gas and electricity bills.

If you would be unable to cope with a sudden increase in your energy bills, it could be an ideal time to switch to a competitive fixed rate tariff which will protect you against future price increases over a pre-determined period – typically one to two years.

Although fixed rate tariffs tend to be around £70 a year more expensive than non-fixed deals, these products could be one of the safest options with further price hikes almost inevitable.

Bear in mind, it is likely suppliers will begin to withdraw their best fixed rate deals if wholesale prices continue to soar.

Best fixed plans available

Despite the security of a fixed-rate tariff, you could face hefty exit fees if you wish to leave the tariff before the agreed term.

Alternatively, you could opt for a capped tariff in which you will be subject to fluctuations in energy prices but only up to a certain degree.

Inflation drops on non-essentials

Despite soaring energy prices, the Office of National Statistics (ONS) revealed this week that inflation fell in June as shops cut their prices in response to the squeeze on household incomes.

Its figures show the Consumer Prices Index fell to an annual rate of 4.2% last month, down from 4.5% in May.

The recently-announced increases in energy bills will serve to put further pressure on the wallets of those in the UK, so a sustained fall in inflation would be welcome.

While the cost of games, toys and audio-visual equipment have fallen, there are some things that are continuing to get more and more expensive.

Bread and other staples are still increasing in cost, with the ONS figures showing that prices for meat have risen by 7.2% in the past year.

*Annual bills based on an average medium user (16,500 kWh gas and 3,300 kWh electricity) averaged across all regions, paying by monthly direct debit.

Prices correct as 05/07/2011

**This material is for information purposes only and should not be considered financial advice. We strongly encourage our readers not to rely solely on this content, but to seek independent advice when making financial decisions.**

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