Big energy price increases likely

Big increases in gas and electricity bills are likely this year, leading energy suppliers have confirmed, reported The BBC.

Bosses of the big six energy firms have been answering questions about prices from MPs on the parliamentary business and enterprise select committee.

Sam Laidlaw, the chief executive of Centrica, which trades as British Gas, said it was "clear that gas prices are going to have to move up".

Ian Marchant of SSE acknowledged that prices might rise by as much as 40%.

Rupert Steele, director of regulation at Scottish Power, said: "The whole industry figures will have to rise significantly."

Their comments came as MPs on the committee asked them to defend the big increases in gas and electricity prices facing households and businesses in the UK.

"We are seeing a seismic shift in commodity prices," said Dr Paul Golby, chief executive of E.ON.

"It's not difficult to see that the pressure is upwards," he added.

Domestic suppliers are under pressure to explain pricing intentions after the BBC learnt that household energy bills could rise by up to 40% this winter. Industry sources have suggested households could pay £400 more a year on average for gas and electricity.

"It is easy to see how you get to the BBC's figures," said Mr Steele for Scottish Energy.

The wholesale gas price is closely linked to the price of oil, which itself hit a record high of just under $140 a barrel this month.

Industry research has suggested wholesale gas prices have risen by more than 70% in 2008.

Last month, Centrica - which owns the UK's biggest energy provider, British Gas - signalled that gas prices for customers could increase again later this year.

Bur Mr Laidlaw said: "Our absolute price levels are currently the lowest in Europe."

"As we import more gas from continental Europe, we are having to pay higher prices," he explained.

Both Scottish Power and Scottish and Southern Energy pointed out that they had to buy all their gas on the international markets, as they do not produce any gas or oil in their own businesses.