British Gas will hike electricity prices by 12.5% from 15 September, in a move that will affect over three million customers on its standard tariff, the company's owner, Centrica, confirmed on Tuesday (1 August).
The average annual dual fuel bill will go up by £76 per year from next month and will affect 3.1 million customers, meaning the average annual dual-fuel bill for a typical household on a standard tariff will rise 7.3% to £1,120, as the company left gas prices unchanged.
The FTSE 100-listed company justified the decision by saying it was the first time it had hiked prices since 2013 and British Gas was one of the last suppliers to make tariffs more expensive. It also added that British Gas lost a further 387,000 domestic customers in the first six months of the year.
"We have seen our wholesale costs fall by about £36 on the typical bill since the beginning of 2014 and that is not the driver," said Centrica chief executive Iain Conn.
"It is transmission and distribution of electricity to the home and government policy costs that are driving our price increase. We are selling electricity at a loss and that is not sustainable."
British Gas, which froze its gas and electricity prices for six months in February, added it will protect its most vulnerable customers against the price increase and that over 200,000 people on the government's Warm Home Discount would be credited with £76.
"We held off increasing prices for many months longer than most suppliers in order to protect our customers from rising costs, so it is a difficult decision to have to announce an increase in electricity prices," said Mark Hodges, head of Centrica Consumer.
"We are fully engaged in the debate over how to ensure the energy market works better for customers and have made a number of proposals to the government and Ofgem."
News of the price hike came as Centrica reported British Gas adjusted operating profits tumbled 23% year-on-year in the first six months of 2017 to £489m. Meanwhile, Centrica's overall adjusted profits fell 11% to £449m.
Alex Neill, Which? Managing Director of Home Products and Services, said: "Hard-pressed consumers waiting to see how the Government will tackle costly standard variable tariffs will be disappointed to see prices rising.
"Customers concerned about their tariff should switch to a fixed price deal now and the Government should rapidly set out how it intends to make this market work better for consumers."