Warm weather dampens Centrica profits

British Gas' parent company has issued a profit warning, despite its much-maligned price hikes.

by Emma Haslett
Last Updated: 21 Nov 2011
Considering energy prices are still at record highs, you’d have thought the likes of British Gas parent company Centrica would be having a rather jolly time of it at the moment. Alas, no: today, the company issued a warning that its profits for 2011 will be ‘marginally lower’ than it had originally expected. That’s partly because warmer weather has meant people are waiting longer to put their central heating on – but also, the company admitted, because recent price hikes have caused customers to abandon it in their droves. Well, that’s competition for you.

Centrica said that in homes, gas consumption in the first 10 months of the year fell by 17%, while electricity consumption was 3% lower, and businesses had used 15% less gas and 12% less electricity. Coupled with wholesale gas prices that are more than a quarter higher this winter than last, the company admitted its residential business had become loss-making since April.

Still – it’s hard to feel much sympathy for the company, when it announced price rises of 18% for domestic gas tariffs, and 16% for electricity in August. In fact, an Ofgem report said that profit margins for energy firms have increased by more than eight times since June, thanks to rate rises. But Centrica insisted the decision hadn’t been taken lightly. ‘We protected customers from the effect of higher costs for as long as possible, before reluctantly taking the decision to increase our… tariffs.’ Aah. Makes the heart bleed, doesn’t it?  

It’s certainly put customers off. Apparently, its total is now down to 15.9m – marginally lower than it was at the beginning of the year, while the number of central heating installations it made was also down, by 10%. That was reflected by the 850 redundancies it announced in its residential services business yesterday. Admittedly, that’s a relatively small number, considering it employs about 10,000 people. But it’s certainly suggestive that even the energy business isn’t immune to the consumer spending squeeze.

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