British Gas Share Price Reacts as it Raises Bills

Sin stock energy companies are in trouble with the Government as price hikes from British Gas and SSE prompt political outrage

Emma Wall 17 October, 2013 | 3:33PM
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British Gas is increasing its gas and electricity prices by 9.2% from November 23. British Gas is the second of the Big Six energy providers to raise its rates in as many weeks. 

Energy provider Scottish & Southern Electric announced it will raise gas and electricity prices by 8.2%. 

At the time, energy minister Michael Fallon to urge customers to leave the utility provider, saying that households should instead switch to another provider and that he was "disappointed" with SSE (SSE) for the proposed hike - which will affect 7.3 million customers and mean the average annual standard bill will rise from £1,354 to £1,465.

Now Prime Minister David Cameron has weighed in on the issue, calling British Gas' increase "disappointing".

Morningstar analyst Andrew Bischoff said the raise in gas and electricity prices were necessary for utilities. 

Speaking about the SSE increase Merchants Trust fund manager Simon Gergel said that while the news was unwelcome it was not surprising due to an increase in operating costs. "There are many costs increasing that are outside of SSE's control," he said. "Not only has the cost of wholesale energy increased, but also the cost of managing their networks and infrastructure as well as spending on developing new renewable energy projects."

British Gas parent company Centrica (CNA) saw share prices bounce on the news of the price hike. Morningstar analysts consider Centrica to be fairly valued - the current share price of 365p sits 15p short of their estimated 'fair' share price. 

The remaining Big Six energy providers - EDF Energy, E.On UK, nPower and Scottish Power - are expected to raise prices in due course. 

The rise in gas and electricity prices comes a month after Ed Milliband promised households that he would freeze energy prices for 20 months if he won the next election. Following the announcement, energy company share prices fell dramatically.

 

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Centrica PLC77.24 GBX-2.40Rating
SSE PLC1,752.50 GBX-1.63Rating

About Author

Emma Wall  is former Senior International Editor for Morningstar