Red-hot profits for British Gas owner

Centrica, the owner of British Gas, has revealed it makes £1.9m profit per day, igniting new anger amongst squeezed consumers, but delighting shareholders...

by Michael Northcott
Last Updated: 19 Aug 2013

Centrica shareholders will be chuffed this morning after the firm reported a 23% rise in profits to £767m, compared with last year’s £673m. British Gas Residential powered most of the jump, where profits rose by £345m, partly thanks to a colder than usual start to the summer months, which increased volumes. The share price was up 1% this morning, suggesting investors are feeling rather content over their morning espresso. 

Of course, the results mean that many British Gas customers feel they have had their fingers burnt. Consumer groups this morning said British Gas has been gouging the consumer by cashing in on its dominant market position. The firm did lower its electricity prices by 5% earlier this year, but that was after it raised gas and electricity prices by 18% and 16% respectively in August last year.  

With electricity specifically, consumption fell 0.1% but profits rose 10%. A profit rise when actual sales and consumption have fallen suggests the firm is benefitting from falling wholesale prices. But squeezing more profit out of its existing operation is important for British Gas as new regulations come into sight. The firm says that new rules about carbon allowances will mean that a large part of its fleet of gas-fired power stations will become unprofitable by next year.

In the business market, the firm’s results actually suffered. British Gas saw a 3% fall in the number of businesses it supplies, down 25,000 to less than one million, and profits fell by 27% to £93 million. That sounds like more of a tricky balancing act than the likes of the Consumer Focus group would care to admit… 

On the positive side, on Wednesday Centrica announced a £1.4bn investment with GDF Suez to begin work off the coast of Norfolk on a large North Sea gas field. The project is expected to create around 4,000 jobs, and represents the largest discovery of a new gas field in the southern part of the North Sea for 25 years, meaning more investment could flow there.

And British Gas needs all the good PR it can get. When profits rise at most corporations, it’s a PR coup. For Centrica, it could be the noose that its detractors hang it with. But will the consumer actually take a stand, or is the debate surrounding ‘fair pricing’ just a lot of hot air...

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