British Gas owner Centrica’s half-year profit has soared five-fold to £1.3bn after being boosted by rising household energy prices.
The company also revealed that it would start paying dividends to shareholders for the first time since 2020 – as its oil and gas arm turned a massive profit.
While British Gas struggled to deal with higher energy prices, Centrica benefitted from its investment elsewhere.
The energy giant said its upstream business, which includes its North Sea operations, saw adjusted operating profit reach £906m in the first six months of the year – an increase of more than 1,100%.
And the business has brought back its dividend to investors, paying 1p per share, which will give the average Centrica shareholder around £100.
Asked if he should use some of this cash to help customers who are facing bills of more than £3,800 from January, chief executive Chris O’Shea said that by running British Gas prudently he is saving customers more money.
Without buying its energy in advance, Centrica would have seen a hit of around £4.4bn, he added.
“I know it’s difficult to see the word profits, or dividends, or similar words when people are having a tough time. I’m very conscious of this,” O’Shea said.
“Bear in mind, over the next couple of years we are expecting to pay a windfall tax of probably well over £600m on our UK gas business off the back of the profits that we’re seeing, so a lot of this is going back into society.”
The profit hike comes from the company’s nuclear and oil and gas business, not British Gas.
The supply business performed much worse. Profits hit just £98m, down 43% compared with the same period a year ago, before the energy crisis had properly bitten.
More than 200,000 customers joined British Gas as some of its rivals went out of business over the period.
The business gained 158,000 new accounts when it took over the responsibility to sell gas and electricity to Together Energy’s customers.
Clydebank-based Together was one of around 30 suppliers that have collapsed in the last year. Regulator Ofgem assigned its customers to British Gas.
But the business said it had also managed to attract 46,000 customers during the period, who switched to its services voluntarily.
It came despite the price cap being the cheapest deal on the market, which gives customers little reason to switch.
Gas prices started rising last summer and have not let up since, hitting record highs several times.
It has put the squeeze on suppliers, especially as almost all of them are banned from passing costs on to customers immediately.
The energy price cap, which limits what suppliers can charge households, takes into account the price of gas on international markets.
But as the price cap was only changed once every six months there was a lag between the gas price that suppliers paid and what they could charge their customers.
Partly as a result of this, many of the energy suppliers that were serving the market a year ago are now out of business.
In response to the crisis, Ofgem will now update the price cap - which puts an upper limit on a supplier’s default tariff - every three months.
“The rise in wholesale commodity prices meant that default tariffs remained cheaper than nearly all new fixed-price tariffs,” Centrica said.
“This resulted in more customers on default tariffs than we had hedged for, requiring us to purchase more commodity from the market at prices above those allowed with the price caps.
“Price cap allowances have been introduced to compensate for these costs, however this recovery will mostly occur in future periods.”
O’Shea revealed that the company has already started to do engineering works on the Rough gas storage site in the North Sea.
It is still in talks with the UK Government to potentially open the site, which could be storing 10 liquid natural gas ships worth of gas by this winter, if all goes to plan. It could then expand further next year.
Commenting on the results, Liberal Democrat Leader Ed Davey said: “Millions of people and businesses are facing a financial catastrophe whilst oil and gas companies are feasting on a profits bonanza.
“We need a much tougher windfall tax to get the funds to help millions of people through what will be the toughest winter in generations.
“The Conservatives are too busy fighting amongst themselves to do anything about it. In fact, these profits aren't even covered by the windfall tax Rishi Sunak eventually supported.”
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