Sky News business editor Michael Wilson

You’re being softened up. Prepare for some huge increases in your heating bills.

Yesterday one Sunday newspaper reported that Centrica – the parent company of British Gas – would announce an increase in gas bills of as much as 30% for this winter.

That’s on top of the industry-wide 15% increase we’ve already seen this past twelve months.

However, when Centrica’s official ‘Interim Management Statement’ hit the wires this morning there was no mention of the figure.

But the company is careful to mention that ‘the wholesale gas price for the second half of this year is double that experienced during the second half of 2007 and for the fourth quarter of this year it is over 80 pence per therm, compared to 44 pence for the same period last year.’

Centrica continues ‘while the current outlook for gas prices does create a challenging environment for energy suppliers, we will take the necessary action to deliver reasonable margins in the retail business.’

You can read that ‘reasonable’ in two ways - on the one hand it sounds as if the company will do all it can to protect its customers from inevitably bigger bills, while on the other it’s a veiled warning that prices will have to rise.

I think it’s the latter. We’ve already noted the depressing, inexorable rise in the oil price, now up 90% on the year and predicted, from its present level of $126 a barrel to be $200 a barrel by the year end.

Centrica, like all quoted companies has a responsibility not just to its customers but to its shareholders. When things get tight, whom do you think will suffer first?

And just to add to the prices story. We’ve just had the worst evidence of industrial inflation since records began in 1986.

Factory raw material costs are increasing at over 23% year-on-year, driven up by rising oil, food and import prices.

The consensus is that because of the consumers’ increasing unwillingness to spend more, that retailers will be forced to absorb the majority of the increases.

This looks like very bad news for the high street and from here it looks as if only the very big and the very fit will survive.

We’ll get the Bank of England’s latest view on the economy on Wednesday, but I’m sure the Old Lady of Threadneedle Street will continue to look on these woes with a her customary stony face.

Comments

[F.DRINKWATER Northwich 24 May 2008 12:32:21]

I see the price of oil has dropped 5 dollars this week but I see tescos in Northwich has put theirs up another two pence a litre so I think it is the oil companys that are putting the prices up.

[Brian Thomson Inverness 14 May 2008 15:47:55]

I recently recived an e-mail from BG who claimed to have low prices for their gas and wished me to sign up with them again. Low prices? Heaven knows what other suppliers are charging!

[dean yorkshire 12 May 2008 20:10:17]

remember last september gas suppliers were giving the stuff away because nobody was using it now yet again we the customer are paying the price what happened to the 80 yrs supply of gas in the north sea back in the 80s mmmm i ponder thats right we sold it to europe for nowt now we pay the price

[tony, yorkshire 12 May 2008 14:02:36]

Without doubt, energy supply and pricing will be a long term problem everywhere. However having the Cedric the Pig organisational spin-off from BG, in charge of 'managing' costs, perhaps might be an imagination stretch a bit too far.

Unfortunately we have the wrong Government to take any action to resolve the long term suply issue.

Oodles of committees might have been set up, talking shops established, consultation engaged with, and wacky ideas emerging.
But as for solutions ? Nil. Or even 'Nil Squared' if such a thing were possible.

What happened to securing the energy supply via Nuclear ?
Is it still in discussion or was that last week's agenda?

Has anyone laid any bricks for the foundations yet?
Thought not.

No doubt they are still looking to secure supply via a couple of million windmills, from where provision of one candlepower of light may possibly cost more than the price of a candle.

Anyway, who is tackling the long term supply ?
I hope it isn't someone from the Tessa Jowell School of Economics who wouldn't know how many zeros there in a Kilowatt never mind a Gigawatt.

Frightning.

[Khalid 12 May 2008 13:29:33]

Sir
Naturally the utilities sector is by far the most hated sector within the industrial conglomorates, notwithstanding the many a tonnes of gas emmitted from within.
The proposed rise in price by British Gas is perverse to say the very least, however, for consumers who have contractual guarantees until 2010, there is obviously little to be alarmed about.
Over the past decade, governemnts have been engulfed in their quest to war, yet have drastically betrayed and let down the population they represent by virtue of illicit judgment thus far as matters perceived to be life' essential.
By way of example, water, gas, electric.
Since the inception of many a shareholder, costs have risen to line the very pockets of those that just sit back and create rising tempers, whilst Energywatch and the Energy Ombudsman appear to be watching another channel.
If prices are going to rise by as much as claimed, then it must be for the law courts to ensure consumers benefit from online tarrifs without the penalty for not paying by direct debit as at the end of the day, [Buster Poindexter] controls both the valve into the house as well as the valve that lines the very pockets of shareholders.
So, lets hope its going to be a long and [Hot, Hot, Hot] summer] and pre-pay meters come into line with online tarrifs as the cost for delivery does not rise no matter what meter is deployed! All those in favour say aye! .....the ayes have it!

[Michael Cornwall 12 May 2008 12:00:32]

I read something interesting a Sunday financial column saying in the states the Fed saying that that the inevitable recession may now not happen.I agree retailers will burden the costs as the consumer wont,I thought this was the plan anyway to have a deflationary effect.
Some more statistics for you from the front line.I spoke to the mattress man who sells 10 lorry loads of mattresses a week into the area.He had a good april now it is patchy, and guest houses are only half booked and not buying mattresses at the moment,thus effecting him. I went for a walk on Saturday afternoon 100 yds from my house and on the beach, I was the only person in the ice cream shop,unheard of on a nice sunny day. I read that someone in Crewe had graffittied a wall saying thank you Mr Brown now I wont buy a house.My point is I am not sure what the government is doing ,The bank has made a move,but what is the long term fuel policy,if we thought nuclear fuel would be cheap,most of the country would most probably go for it. We could do with good leadership,I cant see any