British Gas statement on energy prices

Centrica PLC
                  

               Centrica plc: British Gas price statement

Centrica plc today announced a change to its British Gas tariffs for domestic
gas and electricity customers. The move is set against a backdrop of further
cost increases in the wholesale energy market and a record £143 million loss by
British Gas' residential energy business in the first half-year of 2006. This
follows a loss of £75 million in the second half of 2005.

Despite hopes that the energy market might stabilise, the continued high cost of
energy has led British Gas to increase its residential gas prices by 12.4 per
cent and electricity prices by 9.4 per cent with effect from 4 September 2006.
Over the period between winter 2002/03 and this next winter the wholesale cost
of gas has risen by 266%; it is up 71% in the last 12 months alone. The company,
therefore, has no alternative but to increase prices.

Mark Clare, British Gas Managing Director, said: 'This winter is crunch time for
the wholesale cost of gas. As a result of the investments and commitments we
have made we can see some light at the end of the tunnel but it's still a winter
away. During 2007/08 we should see new infrastructure coming on stream putting
downward pressure on wholesale energy costs. We are now prepared to guarantee a
fall in prices and 'put our money where our mouth is' with the introduction of
our new Fix and Fall offer.'

However, he added: 'As Britain becomes increasingly dependent on imports we are
much more exposed to the factors that impact global gas prices. We also face a
huge anxiety premium in the cost of this winter's gas because of the impact of
soaring oil prices and uncertainties over how much new gas will flow from
Europe. Last winter's experience has shown that new pipeline capacity does not
guarantee the flow of gas.

'Despite being on target to take £200 million of costs out of British Gas'
residential energy business by the end of 2007, it's a stark reflection of the
market that our losses have doubled. Without a price rise these losses would
deepen further. This is unsustainable. Were it to continue we would not be able
to invest in the new supplies necessary to reverse this spiral of increasing
wholesale costs. In the last 12 months alone we have invested £600 million in
new energy assets on top of the £18 billion of commitments we have already made
to bring new gas to the UK.'

Customers holding nearly 2.5 million fixed price products, around 15 per cent of
British Gas' customer base, are protected against this increase because of their
decision to take Price Protection. Following the success of these products,
British Gas is today launching Fix and Fall, the first product on the market
that enables dual-fuel customers to fix their new energy prices for 12 months
and then see a five per cent drop in prices at the end of 2007.

Recognising the impact that increasing prices could have on its vulnerable
customers, earlier in the year British Gas launched a scheme with 300,000
'Winter Rebate' payments for the 2006/07 winter, totalling £90 for those with
dual-fuel. Of these, 258,000 are already committed. The rebate is the biggest
single social initiative from any British energy supplier and represents a key
part of its £80 million spend over the next 12 months delivering help to those
in fuel poverty. Recently, British Gas, along with its six major charity
partners, passed the half million mark for the number of homes it is helping
with fuel poverty measures.

British Gas has recently carried out an energy audit of 800,000 of its
customers' homes to help reduce their energy bills by up to a third. The Energy
Savers Report is thought to be the biggest energy census of Britain's homes,
highlighting savings of around £184 per household for those who have responded.
The results of the Energy Savers Report will be released later in the year.
Enquiries:

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