EDF increases gas and electricity prices by up to 12.9%

EDF Energy has become the country's second major energy supplier to introduce hikes in electricity and gas prices, fanning fears of rapidly rising inflation this year.

Blaming the high wholesale gas price and rising costs incurred to meet the Government's climate change goals, the French group raised electricity prices by 7.9 per cent and its gas price by 12.9 per cent for its 5.5 million customers. The increases, effective from Friday, will push up the average annual dual-fuel customer bill by £100 to beyond the £1,000-per-year barrier.

The hikes follow a similar move by nPower, which raised its gas and electricity tariffs by 16 and 14 per cent respectively – and much steeper increases for customers living in certain regions – earlier this month. The rest of the UK's major energy suppliers are expected to follow suit, perhaps as soon as later this week. The increases are expected because of a doubling of the wholesale price of gas from the low it reached last year.

David Page, an economist at Investec, said that assuming the other power suppliers pushed through similar price hikes, it would equate to a three-quarters of a point hike in inflation for the first six months of the year. "In terms of foreseeable big upside risks, energy prices are the single largest factor," he said.

EDF's moves sparked criticism from observers who argued that, when wholesale gas prices fell by 50 per cent last year, power suppliers were much less eager to pass on the savings to customers through rate cuts. The price comparison site uSwitch.com pointed out that EDF had not pushed through a single electricity rate cut since 2004. Ann Robinson of uSwitch.com said: "Consumers are again being asked to accept an inflation-busting price hike at face value without the courtesy of a detailed, clear and logical explanation. The industry has yet to provide any degree of transparency about how household energy bills are calculated and what costs consumers should legitimately be asked to shoulder."

Aside from rising wholesale gas prices, EDF said its hand was forced by rising costs associated with the price of carbon and investing in new technologies to meet emissions reduction targets.

Sir John Mogg, chairman of Ofgem, was due to meet the Chancellor, Alistair Darling, this week to discuss energy prices.