Centrica is set to raise its household electricity prices in an effort to turn around the fortunes of its domestic energy arm.

Despite losing 485,000 customers in less than two months, the UK's largest energy supplier made the move following price hikes by five of the country's other 'big six' energy firms.

The move comes at a time when the rising cost of power is a politically sensitive issue.

"We're concerned this price rise will hit many people already on poor-value tariffs," a spokeswoman for the UK government said.

Prices will rise 12.5 per cent from September 15th. The firm said it had no alternative, following a four year price freeze.

Centrica Chief Executive Iain Conn said, "Over the last year and a half I'm afraid it's (the electricity supply arm) got into a more significant loss position."

Speaking on the BBC's Today programme, Mr Conn explained: "We have seen our wholesale costs fall by about £36 on the typical bill since the beginning of 2014 and that is not the driver. It is transmission and distribution of electricity to the home and government policy costs that are driving our price increase."

He added: "We are selling electricity at a loss and that is not sustainable."

The government said its policy costs "could not explain" the tariff increases.

For the last six months British Gas has frozen its gas and electricity prices, claiming it could do so by reducing costs in order to offset increased wholesale prices.

The firm said it would protect its most "vulnerable customers" against the increase and that more than 200,000 people on the government’s Warm Home Discount scheme would receive a £76 credit.

While the firm’s 3.1 million customers may be dismayed at the move, Centrica's share price rose 2.2 per cent after the announcement.

Gas prices, meanwhile, are unchanged, but ‘duel fuel’ bills for a typical household are set to rise by 7.3 per cent, which equates to an increase of £75 – taking the average bill to £1,120 per annum.