The energy sector isn't known for its sparkling reputation and industry bosses aren’t new to facing public anger over their behaviour. But even so, it’s likely Centrica CEO Iain Conn will find himself in uncomfortably hot water today.
The British Gas owner reported an £857m loss across the group after writing down the value of its North Sea assets, following the collapse in oil and gas prices. But what's really raising eyebrows is British Gas’s profit spike of 31%.
UK gas prices are trading at just under 30p per therm, but many customers are being charged quite a bit more. It’s enough to get the public’s blood boiling – which, on the bright side, might keep us warm if we can’t afford to pay our energy bills.
Ann Robinson, director of consumer policy at uSwitch.com said, ‘Hearing news of rising profits when wholesale energy prices have tumbled will leave many British Gas customers wondering if they’re being treated fairly.’ MT suspects it might be a stronger reaction than merely wondering.
Centrica claims the operating profits at British Gas rose significantly due to higher energy demand and lower energy efficiency scheme costs. And Conn was adamant that the group had been passing on reductions in wholesale markets, ‘We absolutely have passed on the low costs of commodity prices as they fell to our customers.’
Probably feeling the nation’s wave of scepticism, Conn seemed a tad on the defensive. ‘The reason the profits went up in 2015 versus 2014 is actually very simple,’ he said. ‘It’s about the weather and about consumption. And we saw a very mild 2014 and we saw a more normal 2015 and therefore the amount of energy that our customers used went up and therefore the actual total profit went up.’ So there.
Mind you, there would probably be a bit less indignation and irritation if British Gas (and other energy firms) had better records on this front. The company was the last of the Big Six providers to lower gas prices in the recent round of reductions, with a 5.1% decrease starting from March 16. You’d almost think British Gas was reluctant to lower the prices...
Last year the Competition and Markets Authority found British households were overpaying suppliers for their energy by 5% (around £1.2bn a year) and failing to switch to get the best deals. British Gas did lose 119,999 customer accounts to reach 14.6m during last year, despite cutting gas prices three times during the course of 2015. Which could be due to more people shopping around, fed up with feeling they aren't getting the best deal.
Despite it handing out some of its biggest penalties yet in recent times, consumer sentiment towards regulator Ofgem and its handling of the energy sector, remains lukewarm at best. British Gas’s glowing update might be good news for the company, but it’s unlikely to do much but stoke public discontent as to how the industry is regulated. But until more customers start looking elsewhere – smaller energy firms often offer better deals – the big companies are unlikely to do more than the bare minimum. Because they don't need to.