British Gas not telling truth claiming that wholesale energy prices are rising

British Gas needs to stop peddling inaccurate and misleading statements. In its public comments, it continues to contend that recent domestic price rises are driven by the rising wholesale costs of gas and electricity. But its own published information shows that this is not  the case. In fact, the wholesale prices it pays are no higher than April 2011 and have actually fallen in the last six months. In contrast its electricity prices have risen by about 29% since 2011. Here are two comments from British Gas made after the recent changes that raised gas prices by 8.4% and electricity by 10.4%

We didn’t take the decision to raise prices lightly.  I understand people are frustrated that the price of energy keeps going up – and I’d like to explain why.

North Sea gas is running out.  We have to buy energy on the global market for our customers, and global prices are rising.

(Blog post by Ian Peters, Managing Director, British Gas Residential Energy, 18th October 2013)

We haven’t taken this decision lightly, but what’s pushing up energy prices at the moment are costs that are not all directly under our control, such as the global price of energy, charges that we have to pay for using the national grid that delivers energy to the home, and the cost of the Government’s social and environmental programmes

(British Gas corporate press release 17th October 2013)

But also in the Ian Peters blog post is the following chart. The grey area at the bottom of the gas and electricity graphs is the average price that British Gas paid for its wholesale supplies, which represent about 55% of the total domestic bill.

why_do_energy_prices_go_up_1 - Copy

Look at each chart - gas is at the top, electricity is at the bottom. Has the price of wholesale supplies risen? No, they have stayed remarkably stable for the last two and a half years.

Wholesale electricity prices have actually fallen from around £60 a megawatt hour to little more than £50 since April 2011. But British Gas domestic power prices have risen sharply in this period. The chart below gives an approximate figure for each of the four price changes introduced by British Gas in the last thirty months. (I have used the average figures quoted in the relevant British Gas press release).


British Gas price changes

Taken all together, these four prices changes have increased domestic bills by about 29% in a period when wholesale electricity costs have fallen. It is simply  not accurate for British Gas to claim that rising wholesale prices provide any justification whatsoever for increasing domestic bills. Large publicly quoted companies should be more truthful.