British Gas to post profits hike
Filed under: Utilities
Centrica's British Gas Residential is expected to post a 26% hike in profits to £352 million in the first half of 2012 as the UK's biggest energy supplier benefited from the cool start to summer and higher prices.
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British Gas, which has 16 million customer accounts, dropped its standard electricity prices by 5% in January but they are still higher than a year ago after a 16% rise in August, when gas bills also went up by 18%. The rise in profits means that British Gas Residential made nearly £2 million of profit a day, or some £3.70 per household per month.
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Its haul is likely to rekindle anger over energy companies as consumers struggle to cope after the average dual fuel bill rose to £1,310 a year - more than £200 higher than two years ago. One in five households is now in fuel poverty, defined as when 10% of disposable income goes to pay for electricity and heating.
But British Gas's figures will benefit from weak comparatives with the previous year when unseasonably warm weather hit demand and it delayed passing on rising wholesale costs to customers, pushing the division to make a loss in its second quarter.
When Centrica last updated the market in May it warned its energy costs were continuing to rise, with wholesale gas prices 15% higher for the next winter and other costs set to add £50 to the cost of supplying the average household this year. Although wholesale prices are understood to have reduced slightly in recent months, they are unlikely to be passed on to consumers this year.
The strong performance at British Gas Residential is set to help drive a 13% uplift in underlying earnings at Centrica to £763 million. Its upstream division is expected to see a 25% rise in earnings to £662 million, helped by £1.2 billion of acquisitions, which increased its reserves by 38%.
Centrica claims to have invested £1.80 for every £1 it has earned over the past five years, while higher upstream profits mean its tax bill could top £1 billion for the whole financial year.
Richard Hall, head of energy regulation at Consumer Focus, said: "Wholesale prices rose a little earlier in the year but are now falling and they are still a long way from their peak in 2008. We have long questioned whether drops in wholesale costs find their way through to household bills. Only weeks ago, British Gas was hinting at further bill increases. With forecasts of rising profits for its domestic supply business, British Gas should at the very least put its customers' minds at rest by stopping this sort of rhetoric."
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