THE average cost of home energy bills is set to rise to £1,000 a year, plunging hundreds of thousands more households into “fuel poverty”.

British Gas, the nation’s largest domestic power supplier, is expected to press ahead with controversial plans to increase gas and electricity prices by up to 25 per cent in the next few weeks.

The move would be the biggest ever fuel bill price rise, hitting the elderly and poor the hardest by forcing them to spend 10 per cent or more of their income on energy.

If British Gas proceeds with its plans, other suppliers are expected to follow suit. Economists fear that the rises could damage consumer confidence and dent high street spending.

British Gas declined to comment on the scale or timing of the proposed increases but letters are expected to be sent to its 11 million customers within the next few weeks confirming details of the higher bills.

Insiders at British Gas suggested that the group was considering price rises of between 22 and 25 per cent — ten times the rate of inflation.

This would follow a 14.2 per cent increase in its gas and electricity prices last year. In 2004 it increased gas and electricity prices by 5.9 per cent and then, in a second round of price rises the same year, gas jumped by 12.4 per cent and electricity prices increased by an extra 9.4 per cent.

The proposed rises follow a 75 per cent increase in wholesale gas prices during the past year. This has a spin-off effect on electricity prices, because about 40 per cent of electricity in Britain comes from gas-fired power stations.

Energywatch, the industry watchdog, said that the average household was now spending £750 a year on gas and electricity. The 25 per cent increase would push that to £1,000.

About 1.5 million households are in “fuel poverty” — where energy bills swallow more than 10 per cent of income. This figure is expected to rise to 1.75 million this year and 2.3 million by the end of 2007 if suppliers press ahead with the increases, according to uSwitch.com, the price comparison website.

Age Concern gave warning that fragile pensioners would die if energy bills carried on soaring. A spokesman said: “If the scale of the price rises is true, customers should leave the company without further notice. Enough is enough — we would have a pretty stark message: get away from this company.”

He predicted a “stampede”, which would lead to British Gas losing one million customers if it proceeded with its plans.

Ann Robinson, a uSwitch director, described the scale of the proposed increases as “shocking” and called for Ofgem, the market regulator, to intervene.

She said: “There is insufficient justification for such excessive price rises. We will be looking to Ofgem to step in and investigate the reasons for these increases and verify that they are legitimate.”

Last month Scottish and Southern and npower introduced steep price increases in their gas and electricity prices.

British Gas last night claimed that no final decision had been taken on proposed price rises but insisted that it was monitoring the price of wholesale gas very carefully.

Centrica, the company that owns British Gas, said in December that it was selling gas to residential customers at a loss and gave warning that it might have to increase prices for residential customers.

The spiralling cost of fuel comes when Britain is becoming increasingly reliant on European gas imports, amid dwindling gas supplies in the North Sea. Britain became a net importer of gas for the first time last year. It is forecast that, by 2015, Britain will have to import about 75 per cent of the gas it needs, rising to about 90 per cent by 2020.

Yesterday rival energy suppliers said that they were continuing to monitor wholesale prices, but would not be drawn on whether they planned further increases. A spokesman for npower said: “We will try to protect our customers for as long as possible.”

Powergen said: “We have no immediate plans for price rises but we believe that price increases are inevitable because of the rising wholesale prices.”

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