Bills will increase for British Gas customers from September

The group said it was passing on its costs to customers saying it had "absorbed as much of these additional costs as we could".

The increase, which will affect approximately 18.4 million customers - 12.2 million with gas and 6.2 million with electricity - come on top of a 5.5% rise in both bills which came into force in January.

The rises equate to an average 13p a day extra for gas customers and 7p a day for electricity.

Costs soar

British Gas added that average wholesale gas prices - what the company pays for supplies to farm out to customers - had risen 28% since January and are expected to rise a further 25% next year.

Meanwhile, electricity prices had risen on a similar scale - 22% this year with a 28% jump forecast for next year.

But why the huge increase?

Centrica, the company that owns British Gas, says depletion of the North Sea and Irish Sea gas reserves is taking its toll with the company having to import more supplies.

There is a general fear in the market that there's not going to be enough to supply companies this winter and even into the winters of 2005 and 2006 Energy Information Centre British Gas puts up energy prices

That, coupled with surging crude oil prices which have hit records of more than $44 a barrel in the UK, has seen costs pushed ever higher.

"The era of cheap UK energy is over," British Gas managing director Mark Clare said.

The UK, formerly a net exporter of gas and oil, is set to become a net importer in the next year or so for the first time since North Sea oil was discovered in the 1970s, the Energy Information Centre (EIC) said.

This means UK energy suppliers will be forced to bid for energy sources on global markets and will grow increasingly dependent on overseas suppliers.

Supply fears

By 2015, it is forecast that 75% of the UK's gas requirements will need to be imported.

The biggest problem energy companies face is getting gas here and storing it, an EIC spokesman said.

The UK generates a third of its power from gas

"There is a general fear in the market that there's not going to be enough to supply companies this winter and even into the winters of 2005 and 2006," EIC told BBC News Online.

"I'm not surprised that consumer prices are set to rise as wholesale prices have been rocketing up in the past six months, prices started to head north in March/April.

"October gas - the benchmark price for that month - was about 24p a therm then, now its around 32p and it's not going to get any better," he added.

He also said that as a result of prices moving ever higher in the past six months there are no surplus supplies.

Any increase in gas prices has a knock-on effect on the UK's wholesale electricity market as around a third of the UK's power is generated by gas.

Price reviews

But the UK is not the only country to be affected. Last week, French-owned EDF Energy boosted its tariffs for customer by 3.5% for gas and 3.8% for electricity customers.

Elsewhere, N.Power owned by Germany's RWE has said it is "actively reviewing" its prices for residential and domestic customers.

North Sea oil and gas supplies are in decline

However, fellow utility Powergen - owned by Germany's E.ON - which has upped its gas prices twice this year said it has no plans for a third increase.

But how does British Gas plan to tackle the spiralling costs?

Centrica recently agreed long term import deals worth almost �12bn ($26.7bn) to bring in gas from abroad.

The supplies will be coming from new pipelines from Norway and the Netherlands and also in the form of liquified natural gas (LNG) from Egypt.

The group also pledged to invest around �4bn on securing new sources of gas and electricity for its British gas customers.