Energy giant E.ON yesterday announced a price increase as experts warned that bills are set to double every five years.
The German-owned supplier will put up electricity tariffs by 9 per cent and gas by 3 per cent – adding an average of £62 to annual dual fuel bills for 4.3million customers.
Household squeeze: E.On announced a nine per cent rise in gas prices - as it revealed December food inflation stood at four per cent
Annual food inflation in December was 4 per cent compared to a rise of 2 per cent in incomes last year.
This means a family spending £100 a week on food a year ago will have to find an extra £208 a year to put meals on the table.
The increases in the cost of living come as the country struggles to emerge from recession.
Petrol prices are also running around 20 per cent higher than a year ago, while rail fares leapt this month.
The pain is further compounded by the Government’s VAT increase to 20 per cent.
Consumers have been warned by City analysts that the energy price increases are just a taste of things to come.
Experts at Unicredit banks said the switch to green generation, the building of wind farms and nuclear power stations, as well as the installation of smart meters in every home, will send bills rocketing.
Recovery? The British economy may be growing again but people are facing a living standards squeeze fuelled by price rises and the increase in VAT to 20 per cent
‘As investment occurs, bills could double every five years until 2020.’ The increases would far outpace rises in earnings, they warned, meaning many more households would suffer so-called fuel poverty.
This is where more than 10 per cent of disposable income is spent on heat and light.
However, unlike rivals such as British Gas, Scottish & Southern Energy and Scottish Power, it did offer to delay the rise until after the recent big freeze. The rise comes into effect on February 4.
Ann Robinson, of price comparison website uSwitch.com, described it as ‘another blow to households financially limping into 2011’.
EnlargeuSwitch said that E.ON’s average annual dual fuel bill will rise from £1,187 to £1,249. Energy firms say they have no choice and they are simply passing on increases in wholesale prices.
Soaring: Energy prices have shot up over the last six years
However, figures from TheEnergyShop.com suggest the margin between what they pay for gas against the price charged to customers has risen by more than 200 per cent since 2008.
Increases in grocery bills would have been even bigger but for price cut promotions by supermarkets, according to the BRC.
Director general Stephen Robertson said: ‘Retailers know customers are worried about jobs and personal finances.
‘The competitive retail environment will mean stores go on doing all they can to limit price rises. But a string of costs are higher than a year ago.
‘Extreme weather and poor harvests have driven coffee up 52 per cent, wheat 45 per cent and soya beans 38 per cent yet the shop price of food is up only 4 per cent.’
He warned of further price rises, adding: ‘Next month’s figures will show the initial impact of the latest VAT increase.’