Gas bills to soar as Centrica feels the heat

You'd think that with gas prices at record levels, Centrica should be able to turn a decent profit...

Last Updated: 31 Aug 2010

But for Centrica, the owner of British Gas, soaring energy prices are a real pain in the gas. The cost of obtaining the gas that eventually fuels our boilers has been rising so quickly that it hasn’t been able to pass this on to end-users (i.e. us) – as a result of which its half-year profits will apparently be ‘materially lower’ that the same period last year. It said today it would now be forced to ‘take the necessary action to deliver reasonable margins in the retail business’ – a polite way of saying that it’s about to ramp up our gas bills.

And it wouldn’t be the first time this year. British Gas has already increased by about 15%, back in January, which was also blamed on the rise in wholesale prices. But with costs rising so quickly – both gas and power have basically doubled in price in the last 12 months – it hasn’t been enough to revive margins. Now we can expect further rises later this year, with some estimates predicting that prices could go up by another 25% or so.Bad news for us, and even worse news if you also happen to be a Centrica shareholder.

Still, there was the odd glimmer of light. It seems to have sorted out some of the customer service issues that blighted its performance last year, with complaints to watchdog Energywatch apparently down by nearly 80% and call answering times 60% better than last year. Although this might admittedly be more of a reflection on how bad they were last year, rather than how good they are this year… But Centrica has clearly been taking steps to put things right – which include suing Accenture, the consultancy whose all-singing, all-dancing new billing system was apparently the root cause of most of the problems…

Another interesting aspect of today’s news is the possible impact on the sale of British Energy. MT contributor Robert Peston, the BBC’s business editor, reckons that the government may change the bidding rules in such a way that Centrica might be able to bid for BE individually, rather than with a senior partner. And this would bring obvious benefits – with a nuclear energy cushion, Centrica would be less exposed to the fluctuations in the wholesale gas market. So our bills wouldn’t take such a hit when prices are high.

Then again, that would involve selling a strategic British asset to a British company – perish the thought...

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