British Gas announces 18% and 16% rises to its gas and electricity prices, as Scottish & Southern Energy suspends all doorstep sales with the loss of 900 jobs

British Gas has stunned households across the UK by announcing a rise in gas and electricity prices of 18% and 16%, just eight months after it raised its prices by 7%.

The increase, which will affect 9 million customers and be effective from 18 August, provoked energy minister Chris Huhne to today demand change in the UK electricity market.

At a time when households are struggling with soaring food bills amid persistently high inflation, the price rise will add £192 to the average annual dual fuel bill, which will increase from £1,096 to £1,288 as a result.

Mike O'Connor, chief executive of Consumer Focus, said: "This price rise will send a shock wave across the country. The impact on customers will be severe, piling more pressure on severely stretched household budgets and pushing hundreds of thousands more households into fuel poverty."

The news comes on the same day Scottish & Southern Energy (SSE) announced it is suspending all its doorstep sales activity in Great Britain with immediate effect, leading to 900 job losses. Two months ago the utility giant was found guilty of misleading potential customers when doorstepping them in a bid to get them to switch gas and electricity supplier, following a successful prosecution by trading standards.

SSE said commission-based doorstep selling is "no longer an effective way to gain customers for the long term", because consumer confidence in the way companies sell on doorsteps, and the way in which salespeople are remunerated, is low. It also said it was closing its doorstep sales arm because the sales process "rightly requires increasingly significant customer safeguards".

Alistair Phillips-Davies of SSE said: "The world has moved on. We understand that fewer people are willing to engage with traditional doorstep sellers."

Richard Lloyd, executive director at Which?, welcomed SSE's move: "Very few people think energy suppliers are trustworthy, so it's good news that SSE is listening to consumers and trying to restore its reputation. As energy suppliers consider their policies on doorstep selling, it is important they don't simply shift their efforts to other forms of cold calling.

"We found that almost half (44%) of people have been phoned by an energy company in the past 12 months, and six in 10 felt pressured to switch, so suppliers should be focusing on better value products and customer service, rather than hard selling."

'Unwelcome but unsurprising announcement'

British Gas last increased its prices in December by 6.9% (or £43) for gas and 6.7% (£28) for electricity. In total, within a year its customers will have seen their bills rise by £258 or 25%. This compares with the £239 or 21% increase seen by Scottish Power customers last month.

British Gas blamed steep rises in wholesale costs, which have increased 30% since last winter because of a higher global demand for gas, driven by increased consumption in Asia and the impact on supply of unrest in the Middle East and north Africa. It said customers could benefit from free loft and wall cavity insulation, free energy use monitoring, and flexible payment terms.

British Gas managing director Phil Bentley said: "We know there is never a good time to raise prices, but we are buying in a global energy market and have to pay the market rate."

But consumer groups were outraged. Which?'s Lloyd said: "This is an unwelcome but unsurprising announcement for British Gas's millions of customers. Many people are already having to cut back on essentials because of the rising cost of living, and with energy bills rising further this could be a cold winter for many."

Ann Robinson of uSwitch.com said there was a danger the move could lead the remaining four major suppliers to follow suit with price increases – the first round of rises which ended in March hit almost 28 million customers and added £630m on to household energy bills.

Robinson said: "The impact on family budgets will be huge, but it will be particularly hard on those living on fixed incomes, and I would urge both suppliers and the government to start thinking now of how they can provide some support.

"It may seem a long way ahead, but winter will be coming too quickly for those who cannot afford their fuel bills."

Earlier this week, energy secretary Chris Huhne held a summit with small energy suppliers to find out what help they need to break the dominance of the big six gas and electricity companies and help keep domestic energy prices down. His plan is to cut the red tape that makes it difficult for smaller energy companies to compete with the big six providers.

Huhne said today: "Britain's consumers are being buffeted by the violent and unpredictable winds of global fossil fuel prices. I refuse to stand by and watch this happen. I'm pushing the big six suppliers to help their customers overhaul their draughty homes and understand the best tariffs on offer, and I'm backing new entrants to bring more competition to the market.

"The UK electricity market has to change so that we escape the cycle of fossil fuel addiction. Alternatives like renewables and nuclear power must be allowed to become the dominant component of our energy mix."

Shadow energy secretary Meg Hillier said: "Today's announcement is bad news for bill-payers across Britain. Just as their belts cannot get any tighter, a whopping increase in energy bills will be landing on their doormats. It's unfair, and many will feel they are being ripped off.

"Enough is enough. David Cameron is sitting on his hands whilst our gas and electricity bills soar. It is time for the Competition Commission to launch an investigation into the stranglehold the big six energy suppliers have on the market. The Tory-led government have failed to act on behalf of the public. Customers' household budgets are at breaking point, and this unfair British Gas price hike is the last straw."

The British Gas managing director of services and commercial, Chris Jansen, said on Sky News this morning that he is happy for customers to email him at chris.jansen@britishgas.co.uk and he will respond personally.