THE UK’s biggest domestic energy firm hit millions of households with its biggest-ever hike in gas bills.

British Gas, which has 15.9m customers, is raising gas prices by a record 35%, with electricity prices up 9%.

A 25% rise for dual fuel bills means customers will now pay an average of £1,317 a year – £404 more than at the beginning of the year after British Gas also raised prices in January.

The firm is blaming soaring wholesale energy costs for the latest hikes, which come just days after rival EDF Energy also upped prices. The rest of the UK’s "big six" energy firms are set to follow suit shortly.

British Gas sought to allay mounting fears over fuel poverty by delaying the price hikes for 340,000 customers on its Essentials tariff until next April, saving up to £214 per customer.

But campaigners said it pushed thousands of households closer to fuel poverty, when people spend more than 10% of their income on energy needs.

Adam Scorer, campaigns director of independent consumer group Energywatch, said the firm’s gas prices had more than doubled since 2003, adding: "High prices seem hardwired into this market for the foreseeable future. That hits the poor the hardest."

Age Concern director-general Gordon Lishman called the rises a "hammer blow for vulnerable groups".

"It is absolutely unacceptable that around 2.25 million pensioner households are now living in fuel poverty, and thousands more will soon be facing the same fate," he added.

British Gas, which is owned by parent company Centrica, said it was left with no choice after increasing global demand, diminishing UK gas reserves and record oil prices pushed up its costs.

But it said standard rate customers will not be hit with any further prices rises this year, while 2.1 million fixed-rate customers will not pay any extra at all.

The firm added that it was currently selling energy at a loss as it struggles to cope with an extra £2bn in costs. Wholesale gas prices for the coming winter were 89% ahead of last year, it said.

British Gas managing director Phil Bentley said: "We very much regret that we have had to make this decision at a time when many household budgets are already under pressure. The simple fact, though, is that we have entered an era of unprecedented high world energy prices.

"We can’t absorb the impact of such high wholesale prices."

The higher costs have wiped more than two-thirds off British Gas profits for the first half of the year, the profits falling by 69% to £166m.

This compares with the bonanza £533m seen last year when British Gas waited before passing on previous falls in wholesale energy costs.

But Centrica’s shares rose almost 3% following the hikes. Its interim results are still expected to show group operating profits of around £880m for the six months to June 30 as falling British Gas profits are partially offset by bigger returns from its production operation.

"At a time when suppliers have been complaining about higher costs and difficult times, customers may be looking with some interest at the Centrica profit statement tomorrow morning," Mr Scorer added.

British Gas said higher transport and distribution costs as well as the price of meeting Government targets on renewable energy generation and reducing carbon emissions also accounted for a £32 rise in dual fuel bills.

Energy minister Malcolm Wicks said the Government was "deeply concerned" about the effects on families and vulnerable people. Winter fuel payments to over-60s and over-80s this year will include an extra £50 and £100 respectively to reflect the higher costs.

He added: "The UK is not alone in having to pay more for its energy, high oil prices are being felt across the globe."

But Liberal Democrat leader Nick Clegg said the rises would be "devastating" for many families, particularly the elderly and vulnerable.

He added: "The announcement may have been made in a hot spell in July, but when winter comes round thousands will be forced to choose between heating their homes and cooking their meals."

Conservative shadow energy minister Charles Hendry added: "Britain is being hit especially hard, as the Government has utterly failed to prepare for rising fuel prices during the years of relatively low bills."

Brendan Barber, general secretary of the TUC, said: "The latest energy price hikes will drive the number of households in fuel poverty towards the six million mark at a time when many families are already struggling to make ends meet because of increased food and petrol costs.

"More expensive gas and electricity also puts greater pressure on UK industry, with companies who are big energy users now paying one third more for their power than firms in France and Germany.

"The UK’s coal reserves must be allowed to play a bigger part in our energy mix."

Kate Green, chief executive of the Child Poverty Action Group, said: "These staggering energy price hikes risk hitting the poorest families hardest.

"At a time when the cost of living is rising this is bad news for families and will cause further fuel poverty.

"We urge British Gas to rethink how these price rises will affect low- income families, to improve the protections it is proposing for a small number of vulnerable families and widen these for those suffering hardship.

"Energy suppliers have a responsibility to those receiving their services - not just to their shareholders."

Dot Gibson, vice president of the National Pensioners Convention, said: "Today’s announcement will have a devastating effect on those older people already struggling to pay their energy bills and is likely to drag thousands into financial hardship.

"Around 2.4 million pensioner households are currently spending more than 10% of their income on fuel bills, and for every 1% increase in bills a further 40,000 older people fall into fuel poverty.

"Increases like this mean that older people will be facing even higher bills than before and having to make the unenviable choice between whether they can eat or heat.

"It’s time the Government intervened to prevent the energy companies making profits at the expense of vulnerable pensioners, raised the winter fuel allowance to £500 and regulated social tariffs to give proper discounts to older customers."