Huge British Gas profits fuel row over energy bills

Profits at Britain’s biggest household energy supplier are now expected to be at least six times higher than in the first half of last year after the regulator increased the price cap to compensate for having set it too low in the past.

British Gas, owned by Centrica, is poised to report record first-half profits of more than £585 million after benefiting from increases to the energy price cap, putting it on course for a fresh political storm. The company supplies energy to about 7.5 million households and the bumper results will reignite controversy over companies making huge sums at a time when many customers are struggling with big bills.

Centrica, which reported record group profits of £3.3 billion last year, has already been under fire since an investigation by The Times revealed that it was forcibly installing prepayment meters in vulnerable customers’ homes.

Centrica said yesterday that first-half adjusted operating profits for its British Gas retail division were “expected to be significantly higher than in previous years”. It indicated to analysts that it expected to exceed the record £585 million British Gas made in the first half of 2010, when it still supplied almost ten million households. In the first half of last year it made only £98 million, down from £172 million in 2021.

Simon Francis, co-ordinator of the End Fuel Poverty Coalition, said: “People will be aghast that once again British Gas is on track to post huge profits, while its customers are cutting back on essentials.”

Centrica said that the main driver of the increase was “a material positive impact in British Gas Energy from allowances in the UK domestic default tariff cap relating to costs incurred in prior periods”.

The energy price cap effectively limits suppliers’ revenues per customer for default tariffs, based on Ofgem’s assessment of the costs an efficient company should incur. It was set at £4,279 a year for a typical household from January and £3,280 a year from April, including extra allowances to compensate suppliers for the cap having previously been set too low to reflect all their costs.

Household bills in the first half were lower than the cap because they were subsidised by the energy price guarantee, which limited them to £2,500 a year for a typical household; the government paid suppliers the difference.

As well as British Gas, Centrica has interests in nuclear power plants, North Sea oil and gas, gas storage and energy trading. Its shares closed down ¼p, or 0.2 per cent, at 117¾p.