UK: British Gas owner Centrica boosts profits and fans flames of anger over price hikes
The owner of British Gas increased profits at its residential arm by 23% today in a move fanning flames of anger over recent price hikes.
Centrica said profits at British Gas Residential, which has 15.8 million energy accounts in the UK, lifted to �345 million in the six months to June 30 after volumes were boosted by the cool start to the summer.
But the UK’s biggest energy supplier also benefited from higher prices because, while it dropped its standard electricity prices by 5% in January, this did not cancel out a 16% rise in August, when gas bills also went up by 18%.
Consumer Focus has accused utility companies of being quick to pass on rising wholesale costs to consumers but being slow to drop prices when they fall and today’s bumper profits haul is likely to provoke further outrage.
Profits at its residential arm are also higher because of weak figures a year ago when it delayed passing on price rises to customers, meaning it was supplying at a loss.
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The rise in profits means that British Gas Residential made some �1.9 million of profit a day as consumers struggle to cope after the average dual fuel bill rose to �1,310 a year - more than �200 higher than two years ago.
Richard Hall, head of energy regulation at Consumer Focus, said: “Wholesale prices rose a little earlier in the year but are now falling and they are still a long way from their peak in 2008.
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“We have long questioned whether drops in wholesale costs find their way through to household bills.”
Centrica said higher volumes and tariffs more than offset the higher commodity prices and other costs. But it claims to control just 15% of a customer’s bill through its operating costs and profit margins.
Chief executive Sam Laidlaw said: “Centrica has performed well in the first half of 2012 despite challenging market conditions, although the increase in earnings must be placed in the context of unusually low levels of consumption and profits in the UK in the first half of 2011.”
The stronger performance at British Gas helped the group’s underlying earnings rise 14% to �767 million - slightly better than City expectations.
Its upstream gas and oil production business saw profits rise 28% to �682 million, buoyed by �1.2 billion of acquisitions.
The group yesterday announced a �1.4 billion investment with GDF Suez to develop a major North Sea gas field off the coast of Norfolk, creating some 4,000 jobs. It is believed to be the largest gas discovery in the southern North Sea for 25 years.
However, it said it will review the future of gas-fired plants at Peterborough and Roosecote in Cumbria because of challenging conditions. It follows its decision to close a station in King’s Lynn.
The company said changes to carbon allowances will render much of its UK gas-fired generation fleet unprofitable from 2013.