Energy chief warns of bigger bills

Sam Laidlaw, chief executive of British Gas owner Centrica, told a committee of MPs that soaring wholesale energy costs mean it is "clear" prices will have to go up.

There is growing speculation that bills could rise by as much as 40% later this year - on top of an average 15% rise imposed by the UK's major energy firms at the start of this year.

Mr Laidlaw was speaking to members of the Business and Enterprise Select Committee, which is questioning the companies' bosses as part of an inquiry into energy prices.

He said: "It's clear that at some point these prices will have to rise. The issue we face in the UK is that, as our gas production falls, we are no longer isolated from international markets and have to buy increasingly large volumes of gas from different parts of the world.

"Global gas prices are being driven ever higher by record oil prices and by rising demand from regions such as Asia.

"While other costs remain broadly static or have fallen, the rising commodity costs form an ever greater proportion of customers' bills."

Wholesale gas prices for next winter have doubled this year compared to last, and recently passed through the £1 a therm barrier for the first time.

In Europe, wholesale gas costs are linked to oil prices, which have surged to near 140 US dollars a barrel. European firms can often buy cheaper gas in a more liberalised UK market to fulfil immediate needs and stockpile it.

The MPs launched their inquiry into the market to look at the case for referring energy firms to the Competition Commission, and examine whether companies and the Government are doing enough to help the fuel poor.