More than three million British Gas customers will see their electricity bills go up by 12.5% from 15 September.
Energy giant Centrica confirmed the end of its long-standing price freeze after it mistakenly published an incomplete statement about the price hike on its website on Monday.
It said gas prices would not be going up. This means the average annual dual fuel bill for a typical household on a standard tariff will rise by £76 to £1,120 – an increase of 7.3%.
Centrica-owned British Gas said the price rise was its first since November 2013 and that it would give credit to more than 200,000 vulnerable customers to protect them from the increase.
Research suggests that British Gas should be cutting bills, not putting them up, as the wholesale cost of energy has been falling.
Analysis of energy regulator Ofgem’s supply Cost index by collective switching site The Big Deal shows that since a peak in December 2016, the costs for energy companies have fallen by 9%.
But British Gas chief executive Mark Hodges asserted “wholesale prices during the last 12 months have not gone down” and that the price hike was down to “cost pressures”.
He told Sky News: “We haven’t taken this decision lightly. We realise that 3.1 million people are affected. But we have in the end have had to respond, like many of our competitors to the underlying increases we have seen in electricity.
“Our costs have gone up over the past few years by around 16%, so in the end, despite our own efforts to try and keep our costs under control, our efforts to improve our service, we have just had to make this difficult decision.”
He would not be drawn on whether the firm expected to lose customers over the price increase.
“Customers do have choice. They can move to many other companies… and that puts the pressure on us, and that is why we don’t make decisions like today’s decision lightly. We are very thoughtful about the impact on our customers, and on the number of customers that we are able to serve.”