British Gas to raise prices after plunging to £140m first-half loss

Centrica, the owner of the British Gas brand, is set to cause a fresh outcry today by announcing new price rises for its 17 million domestic customers.

The company, Britain's biggest energy supplier, is expected to put up gas prices by 12 per cent and electricity prices by 9 per cent. The latest increases come on top of a 22 per cent rise in tariffs for gas and electricity in February.

Despite that increase, Centrica is expected to report that its domestic energy business plunged to a loss of about £140m for the first six months of the year. Overall, the group is expected to announce pre-tax profits of a little less than £700m, down by about 29 per cent on the same period last year.

Centrica's new chief executive, Sam Laidlaw, is expected to defend the latest increase in bills by arguing that wholesale gas prices have risen by 70 per cent in the past year, leaving British Gas with little option but to pass on the higher costs.

In the first five months of this year, British Gas lost a net 350,000 customers but since May it is thought to have slowed the rate of defection as rival energy companies put up their prices. In June, Scottish Power increased gas and electricity prices by 17 per cent and 10 per cent respectively, while the French-owned EdF, which runs London Electricity, SWEB and Seeboard, raised gas prices by 19 per cent and electricity prices by 8 per cent earlier this week.

The latest round of British Gas price rises may halt that trend and lead to a renewed upturn in customer losses.

Wholesale energy prices have spiked sharply higher in the past two weeks because of the extremely hot weather and heavy demand for air conditioning. Next-day delivery prices for electricity rose yesterday to about £150 a megawatt hour.

However, forward gas prices for this winter fell on expectations that the market will be less tight than in previous years. Two new gas pipelines from continental Europe are due to come on stream this winter while the capacity of the existing interconnector from Belgium is being increased by nearly a half.

The Orman Lange pipeline from Norway will have a capacity of 27 billion cubic metres - enough to supply almost a fifth of UK demand - while the BBL pipeline from the Netherlands will add 16 billion cubic metres of capacity.