Thousands more families are facing a winter of fuel poverty misery after British Gas announced a huge price rise this week. If the increase is followed by other energy suppliers, then gas and electricity prices will push up the rate of inflation by one per cent, which will increase pressure on the Bank of England not to cut interest rates. So are the energy companies simply raising prices because they can ? or is something else to blame? Nigel Burton reports

Q: Why are gas prices risnig?

A: Thanks to a generous North Sea dowry exploited in the Seventies and Eighties, the UK is now the third largest gas consumer in the world.  But British suppliers have to buy gas from an international market place because the UK is no longer self-sufficient in gas production. In effect, they are a shopkeeper selling the product not the factory boss making it. According to Centrica, British Gas?s parent company, the price it pays for gas has risen by 89 per cent in the past 12 months. Although we still getmost of our gas from the North Sea, production has been declining faster than expected. As a result the UK is having to import gas from Europe where prices are linked to the price of oil.

Q: Will electricity continue to go up as well?

A: Yes. British Gas increased its electricity bills by 9.4 per cent yesterday. Gas fuels 40 per cent of UK power generation so if it goes up, the price of electricity goes up ? a classic vicious circle.

Q: So will they go on rising?

A: Embarrassingly for British Gas, the international price fell by almost half last week, from 60p per therm to 33p.

Q: Why did this happen?

A: Several North Sea gas fields that were out of commission have resumed production? easing fears of a shortage of supplies this winter. The warm weather has also led to a decrease in demand.

Q:So why didn’t British Gas just scrap its 35 per cent price rise?

A: Sadly, the international energy market is notoriously volatile. Companies such as British Gas have to buy suppliesmonths ahead and don?t have the flexibility to chop and change prices in line with the price fluctuations. However, gas prices shadow oil prices and the cost of a barrel of crude has been slipping back gradually from an all-time high of $140 a barrel last month to yesterday?s price of $126.48. A barrel in the energy industry contains 42 gallons.

Q: What does British Gas suggest its customers tdo?

A: In an interview earlier this summer British Gas chief Jake Ulrich could offer nothing more than a glib suggestion that people should wear two jumpers this winter instead of one when it gets cold. The company’s line is that higher prices aren’t the problem, poor energy efficiency is. It urges customers to invest in new central heating boilers and better appliances to reduce consumption.

Q: What about the least well-off customers?

A: In an attempt to head off renewed calls for a windfall tax, the company said it would delay the increase for its 340,000 poorest customers. But British gas, the country?s biggest energy supplier, has ten million gas customers.

Q:Is British Gas profitable?

A: Yes, but not as much as it used to be. Profits have fallen 69 per cent, to [pounds]166m. Things are looking better for parent group Centrica, which unveiled better-than-expected profits of [pounds]992m yesterday. These are 19 per cent lower than last year, but that was a record.

Q:I’m not a British Gas customer, will I be okay?

A: Probably not. The latest round of increases was sparked by EDF earlier this week. nPower, the North?s biggest supplier, warns today that an hefty increase is inevitable.

Q:So what can I do?

A: The Government encourages homeowners to switch suppliers. Websites such as uswitch. com will help you choose a new supplier, but customers need a good grasp of their energy costs for the sites to return meaningful results.

Experts are advising customers to sign up for fixed rate deals, but get in quick, they are expected to be withdrawn soon.

Q:Don’t we have reserves of gas?

A: No. The Government has been criticised for not doing more to boost Britain?s gas storage capacity. In Europe most countries have about 60 days? worth of reserves. France has 122 days-worth in store. In Britain if there were amajor supply disruption we could hold out for only 13 days.

Q:Can’t we use liquefied natural gas(LNG)?

A: We could if someone would sell it to us. Britain opened its first LNG import terminal recently, but it has been idle for much of the time.  Shipments have been going to Spain and the US, where market prices are higher.

Q:Will the Government step in?

A: Chancellor Alistair Darling is facing calls to levy a windfall tax ? a one-off charge ? on energy companies to give to the poor. But the Prime Minister is resisting such calls and British Gas says it already pays a huge tax bill.

A windfall could be counterproductive by driving UK energy companies abroad, thereby depriving the country of future tax revenue.