By Karolin Schaps and Nina Chestney
LONDON (Reuters) - Britain's largest energy supplier Centrica (L:CNA) raised its household electricity prices on Tuesday to try to turn around a loss-making part of its business despite shedding another 485,000 customer accounts in under two months.
The owner of British Gas is the last of the big six energy suppliers to increase prices this year, with the rising cost of power an increasingly sensitive political issue.
"We're concerned this price rise will hit many people already on poor-value tariffs," a spokeswoman for the British government said.
Centrica announced a 12.5 percent power price rise from Sept. 15, its first in nearly four years, and said it had no alternative.
"Over the last year and a half I'm afraid it's (the electricity supply business) got into a more significant loss position," Centrica Chief Executive Iain Conn told journalists.
Albeit bad news for its customers, Centrica investors welcomed the effort to stem losses and its shares were up 2.2 percent at 0920 GMT, towards the top of the list of gainers on London's FTSE index (FTSE).
SSE (L:SSE), Britain's second-biggest energy supplier, and rival Scottish Power last month announced further customer losses, underscoring the increasingly competitive nature of a market that has attracted dozens of new entrants.
POLITICAL PRESSURE
Regulator Ofgem has proposed capping bills for some of the country's most vulnerable customers. This followed a government request to set out plans to help those placed on the poorest-value tariffs.
Centrica said it would protect 200,000 vulnerable customers -- typically seen as those who qualify for receiving a government contribution to pay their energy bills -- from the price rise.
Figures published by Ofgem in December showed 74 percent of British Gas customers were on its standard tariff, which is typically more expensive than other offers.
Centrica's price increase also comes despite steep losses in customer accounts as many switch to rivals and new market entrants who often offer cheaper tariffs.
The utility shed another 485,000 customer accounts between May 8 and the end of June, bringing the total this year to 746,000.
Analysts at RBC Capital Markets, who have a 'sector perform' rating on Centrica shares, called the customer losses "concerning" and said the price rise would put further political and regulatory scrutiny on the business.
The head of Centrica's consumer business, Mark Hodges, said a majority of those leaving did so as part of collective initiatives to switch suppliers.
The utility is focussing much more on delivering end-consumer services like helping with boiler breakdowns or selling energy management equipment.
The group's first-half adjusted operating profit fell four percent year on year to 816 million pounds ($1.1 billion), in line with analysts' expectations.
It said it was on track to meet its 2017 targets and managed to bring down debt into a range it had been targeting to reach by the end of the year.
Net debt stood at 2.9 billion pounds at the end of June and Conn said the company was keeping the possibility to raise its dividend under review.