Npower, Britain’s fourth-largest power supplier, was criticised yesterday after raising customer bills by 17 per cent for gas and 13 per cent for electricity.

Andrew Horstead, head of energy research at the consultancy Utilyx, acknowledged that suppliers were facing growing cost pressures, but said that npower was using record oil prices as a “smokescreen” to restore profit margins. He said that the link between gas and oil prices was nebulous and indirect.

Npower’s announcement is expected to open the floodgates for further price rises from rival power companies such as EDF and E.ON, which owns Powergen. Centrica, the owner of British Gas and the UK’s biggest supplier, is expected to unveil its own price increases next week.

Npower said that it had been forced to lift the cost of average household bills for dual-fuel npower customers from £908 to £1,047 because the cost of buying energy on the wholesale markets had “increased dramatically”.

“Since mid-February 2007, electricity wholesale costs for 2008 have increased by 66 per cent and gas by 60 per cent,” a statement said. The company also blamed increased distribution and transmission costs.

Figures from Utilyx show that spot gas prices in Britain remain significantly lower than in the winter of 2005-06. Average spot gas prices in Britain were 53p per therm yesterday, 21 per cent lower than two years ago, when a supply squeeze and severe weather triggered a rise to an average of 64p per therm and briefly to highs of nearly 200p per therm.

The increase to npower’s standard tariff is effective immediately and will affect more than two thirds of its 6.8 million customers. Average bills will be £92 higher for gas and £48 for electricity.

Npower said that, because of regional price differences to reflect distribution costs, the maximum price rise for gas would be 23.8 per cent and the maximum increase for electricity would be 27.1 per cent.

Tim Wolfenden, of uSwitch.com, said that there were still “lots of questions” about the motivation for npower’s price increases. It was impossible to say whether npower’s price rises were justified because its statement contained no detailed explanation of its rationale.

Scottish & Southern Energy said yesterday that it had acquired Air-tricity, the Irish wind farm company, in a debt-inclusive deal valued at €1.8 billion (£1.3 billion).

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive