SOARING fuel prices could plunge thousands of households into poverty and cost lives, consumer watchdogs warned last night.

The warning follows reports that British Gas is on the verge of announcing a 25 per cent increase in fuel bills - thought to be the biggest rise in history.

Watchdogs are now warning that the rise could result in people having to decide between heating or eating.

Age Concern has also said the higher bills could lead to deaths.

More than 11 million customers are expected to be affected by the increase.

British Gas has not confirmed or denied the increases, but admits the rising cost of wholesale gas prices is putting pressure on its business.

Because the majority of electricity comes from gas-fuelled power stations, the increase is to have a knock-on effect for electricity prices - and other power companies are expected to follow suit.

Karl Brookes, from consumer watchdog Energywatch North-East, said that for every one per cent increase in price, 40,000 homes were plunged into fuel poverty, where ten per cent of the household income was spent on fuel.

He said: "That's the technical term, but it's the decision whether you stay warm or you put food on the table.

"This decision is going to impact more in the North-East - than say in London - where you're going to see the most vulnerable consumers being hit the hardest.

"Thousands of homes across the North-East are going to be facing hardship."

He said British Gas was already the most expensive supplier of gas, and since 2003, electricity prices had risen by about 30 per cent and gas prices by 40 per cent.

Mr Brookes added: "I think British Gas is making a strategic decision, the outcome of which remains to be seen.

"Already one-million consumers have left British Gas.

"Consumers should already be voting with their feet and finding a better deal."

This winter, pensioners received their winter fuel payments before Christmas as weather forecasters predicted the harshest winter in a decade.

The payment of £200, and £300 for people over 80, is designed to help older people pay their bills.

But Age Concern director general Gordon Lishman said more than 28,000 people die from the cold each winter.

He said: "Many pensioners live on a low, fixed income and are hit particularly hard by hikes in their fuel bills.

"Rising fuel costs mean older people on fixed incomes will struggle more than ever to keep warm, which could mean even more deaths."

Madeleine Walton, the chairwoman of Teesdale District Council, in County Durham, and a community worker with Teesdale Day Clubs, which provides meals to elderly people, said the price rises were disgraceful.

She said: "It's going to make it much more difficult for vulnerable people. It's a huge percentage and going to be very difficult to bear."

A spokesman for energy watchdog Ofgem said it was not in its remit to investigate price rises if they were caused by market forces.

British Gas has said the lack of competition across continental markets has cost UK customers an extra £300m because it does not have sufficient access to European gas to meet peak demand.

A spokesman for Centrica, the parent company of British Gas, said: "Wholesale gas prices for 2006 are up about 75 per cent on 2005.

"Clearly, all suppliers are buying their gas in the same market, therefore we would expect that suppliers will be increasing their tariffs substantially as we go through 2006.

"But we haven't said anything about timing or scale of an increase."