British Gas: Owner Centrica reveals £969m profit after price cap increase amid high energy bills
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British Gas owner Centrica has revealed that earnings at its retail supplier business soared by nearly 900% as it was handed a price cap boost of around £500 million. The energy giant said underlying earnings at its gas and electricity supply arm leaped 889% to £969 million in the six months to June 30 from £98 million a year earlier.
It said the result was buoyed as Ofgem’s price cap in the first half of the year – when customers saw their bills limited to £2,500 a year under the Energy Price Guarantee – allowed it to recoup losses seen a year earlier, to the tune of about £500 million.
Overall, Centrica swung to a £6.5 billion operating profit in the first six months of the year against operating losses of £1.1 billion a year earlier. On an underlying basis, operating profits rose to £2.1 billion from £1.3 billion a year ago.
Energy firms saw their supplier profit margins hit last year, when wholesale prices were sent soaring by Russia’s invasion of Ukraine but the price cap protected customer bills from the worst of the rises.
Wholesale prices have come down in 2023, while the price cap has been set at a level by Ofgem this year to allow firms such as British Gas parent Centrica to recover some of those earlier losses.
Centrica said it lost about £250 million in the first six months of 2022 alone due to the price cap coming in lower than the cost it faced in wholesale markets, with the impact at its worst in the final quarter of 2022.
But Wednesday’s update comes at a sensitive time – with households and businesses continuing to face high energy bills and widespread cost pressures.
Simon Francis, co-ordinator of the End Fuel Poverty Coalition, said: “These profits are a further sign of Britain’s broken energy system. At a time when household energy debt is spiralling to record levels and energy bills remain double what they were just a few years ago, the profits posted will be greeted with disbelief by those struggling through the crisis.
“There will of course be questions about how these profits were made, but the reality is that energy firms are operating on a playing field set by the Government.”
Liberal Democrat leader Sir Ed Davey said: “It beggars belief that after all these months this Conservative Government is still allowing energy firms to rake in extraordinary profits while millions of families struggle.”
Centrica said: “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 the first half of 2023.”
Last year, Centrica more than tripled its adjusted operating profit, which reached £3.3 billion in 2022 amid turbulence in global energy markets. Big swings in energy prices helped the company’s energy marketing and trading division, which made £1.4 billion in profit during the year, a 1,900% increase from the year before.