It may have been the coldest winter in 30 years, but at least one company had its cockles warmed: British Gas saw its profits almost double during the first half of the year, as chilly customers cranked up their heating to ward off the icy weather. Operating profits were up 98% to a red-hot £585m, from £295m last year. But that doesn't mean customers should expect another round of price cuts; with wholesale gas prices on the rise, it's already warning about a squeeze on margins in the second half. Sam Laidlaw, boss of parent company Centrica, says they'll try to ward off increases until it’s absolutely necessary - but he wasn't ruling it out...
The bad weather meant customers used 8% more gas and 3% more electricity than they did a year ago, which helped to boost profits. So too did the addition of 223,000 new customers during the first few months of the year, after British Gas became the first major supplier to pass cuts in wholesale prices on to its customers. In fact, as a result of these price cuts and its energy efficiency advice, British Gas insists its customers actually ended up paying less, on average, despite using more energy. Although, of course, that didn't stop critics sniping that it should have passed on these savings sooner.
In fact, higher profits are always a double-edged sword for British Gas: it pleases shareholders, but it makes consumers question whether they're being over-charged. So you can understand why Laidlaw was so keen to point out today that the company was unlikely to make much more profit this year - apparently, rising wholesale prices are going to squeeze margins for the rest of 2010. But with the acquisition of Venture Production and a 20% stake in nuclear company British Energy, Centrica is trying to move away from the volatile wholesale market and into producing its own energy, which it claims will help to protect customers from price fluctuations in the future.
But in the shorter term, if wholesale prices keep rising, eventually our bills will too - a prospect that Laidlaw refused to rule out today. ‘We are very mindful of not pushing through any price increases unless we absolutely have to,’ was all he'd say. Not terribly reassuring. But after today's bumper results, British Gas will know that any sort of hike this year will be a very tough sell...
In today's bulletin:
Heat is on British Gas as profits double
Emergency Budget won't tip us back into recession (probably)
Retailers are World Cup winners as sales rise
Labour PFI contracts: 'good value' for taxpayers' money?
Letters from Malawi: What good is a house if there's no one to buy it?