Profits at the UK’s biggest energy supplier British Gas ballooned to a record of almost £1 billion in the first half of the year at a time when millions of families were struggling to pay their bills.
British Gas’s owner, energy giant Centrica, said the near tenfold increase in profits to £969 million in the six months to June was “mainly due to oneoff factors” linked to the operation of Ofgem’s price cap.
The company said it had made around £500 million in extra profits through a mechanism under the price cap that allows it to recover costs at a time of “increasing and volatile” wholesale prices from 2021 onwards.
The company said: “This meant all suppliers had to purchase a portion of their electricity and gas at levels above the price cap. Allowances to recover this cost were introduced into the price cap from April 2022, with recovery continuing into H1 2023.”
Other factors boosting British Gas Energy profits included “effective risk management” and “higher unit margins.”
Nevertheless the huge returns during an acute energy crisis is likely to further enrage consumer groups and charities that have accused major suppliers of profiteering at the expense of customers.
Richard Neudegg, director of regulation at comparison site Uswitch.com, said the scale of the profits meant that the price cap needs to be overhauled.
He said: “The strong supplier profits now possible under the energy price cap — as part of the current regulatory environment — are driving increasingly fewer incentives for suppliers to innovate and offer cheaper, competitive deals that could bring prices down.”
British Gas supplies energy to around 7.5 million households and 529,000 small businesses. Ofgem set the price cap for the average household on standard variable tariffs at a record £4,279 a year from January 1 after wholesale prices spiked last autumn in the wake of the Russian invasion of Ukraine.
However, a Government price guarantee put in place by Liz Truss when she was Prime Minister meant that a typical annual bill was no more than @JonPrynn £2,500, still hugely higher than historic levels. Centrica said it had doubled the level of support offered to vulnerable customers to £100 million.
Group profits were also elevated by one-off factors with an operating loss of £1.1 billion last year turned into a profit of £6.64 billion this time.
Underlying operating profits were up from £1.34 billion to £2.08 billion. The interim divided was raised by a third to 1.33p and the share buyback programme is being boosted by £450 million to £1 billion.
CEO Chris O’Shea said:“Nothing is more important than delivering for our customers — it’s why we are here. Today’s results allow us to increase our customer support package to more than £100 million, and our new green investment strategy will see us invest several billion pounds in the energy transition
