TORCUIL CRICHTON and DOUGLAS FRASER

The heads of the UK's biggest energy firms have warned householders to brace themselves for even higher bills as many already struggle to meet the rising cost of domestic services.

The forecast that prices are likely to rise due to soaring wholesale gas costs came in evidence to the Commons Business and Enterprise Select Committee.

The inquiry into energy prices comes amid fears that bills could rise by up to 40% this year while new research from a Scottish think-tank demonstrated that banks, energy and telecom companies are missing a business opportunity by pushing costs up for the lowest-income customers, Sam Laidlaw, chief executive of British Gas parent company Centrica, told the Commons committee that he had not made a decision yet on prices, but added: "It is clear that ... at some point in the future gas prices are going to have to move up."

Paul Golby, head of E.ON UK, also said that bad debts doubled in the past 12 months as customers struggled to meet rising bills. The average dual-fuel customer is now paying nearly 15% more - £1048 - for gas and electricity after the latest round of price increases, according to consumer watchdog energywatch.

Mr Laidlaw defended Centrica's £1.2bn profits and added that accusations of "fat cat earnings" were unfair.

He said: "We need to make a return in this business because we need to invest in new sources of gas for the UK."

As well as spiralling wholesale gas costs, suppliers are also under pressure to tackle climate change through cutting carbon emissions and sourcing more electricity from renewable sources.

Aged and Age Concern called for a £50m rebate for fuel poor pensioners this winter amid fears that 800,000 older households could be dragged into poverty if prices jump 40%.

The companies which are committed to spending £50m on social assistance schemes said they would consider the proposals from the lobby groups. But they added that any attempts to set a mandatory social tariff for vulnerable customers would stifle innovation and could reduce competition in the market.

However, according to research by the Scottish Council Foundation (SCF), the Edinburgh-based think tank, large companies are doing little to reduce the cash tariffs and pre-paid costs that mean poorer customers are paying as much as £300 more per year for energy, if they do not pay by direct debit or handle their accounts online.

The profit made from pre-payment meters runs to £296m throughout Britain, and £34m in Scotland, yet it is thought that only around one-tenth of that sum is ploughed back into social tariffs.

The research, backed by the Scottish Consumer Council, has drawn from international experience to find ways in which those who can only pay in cash are given a credit rating that recognises regular payments being made.

The risk assessment of customers is described as "years off the pace" in Britain, while companies exaggerate the impact of their help for vulnerable customers. Businesses are urged to see lower-income households as a source of profit, even though the margins are not as great, whereas they now tend to see their social responsibility only as charity work.

Linda Boyes, deputy director of SCF, who led the research, said: "In the rush to serve higher-income consumers perceived as a lower risk, many businesses are potentially ignoring a sizeable market which they think of as not profitable.

"Consumers from lower-income groups tend to have a higher degree of customer loyalty and could ultimately migrate to other services if they were offered through appropriate distribution channels, at affordable prices and if payments methods accommodated needs."