British Gas parent company CEO calls for 'social tariff' amid soaring profits and energy crisis

The boss of Centrica, the parent company of British Gas, has reiterated the need for a "social tariff" that would enable less well-off individuals in the UK to pay reduced prices for their gas and electricity.

Chief executive Chris O'Shea said that implementing a special tariff for those facing financial hardship would be “the best thing we can do for consumers”.

A social tariff is a pricing mechanism designed to provide reduced rates or financial assistance on essential services such as energy to individuals or households facing financial hardship or economic challenges.

In the context of energy, a social tariff may involve offering discounted rates or special pricing structures for electricity and gas to ensure that basic energy needs are met for those who may struggle with standard utility costs.

It came as it was revealed Centrica’s retail arm - which is mainly made up of British Gas, but also Irish supplier Bord Gais - had seen a substantial increase in profits, surging from £94 million in 2022 to £799 million last year.

Read more: Chris O’Shea: who is boss of British Gas owner Centrica and how much does he earn?

The entirety of this profit was generated during the initial six months of the year, with a major contributing factor being the way the energy price cap works.

In the first half of last year, British Gas and other energy providers were granted the opportunity to recover certain costs incurred amid the energy crisis.

During the first half of last year, British Gas and other energy providers were granted the opportunity to recover certain costs incurred amid the energy crisis. For British Gas, this added £500 million to its bottom line. On a statutory basis, thanks to the way that Centrica buys energy in advance, it made a profit of £6.5bn last year before tax, up from a loss of £383m in 2022.

O'Shea said it is essential for companies to generate profits to stay healthy. The downfall of numerous financially unstable suppliers in recent years has resulted in an approximate cost of £88 per household.

But the chief executive said additional measures are necessary to safeguard the most vulnerable individuals.

“The poorest in society are really struggling but it’s not just the energy. It’s energy, it’s rent, it’s mortgages, it’s food and all manner of costs,” he said on a call with reporters. “What I’m focused on is how do we fix this in energy and that’s why we need a social tariff, that’s why we need the standing charge to disappear. I think that’s the best thing we can do for consumers. That will reduce the cost for the poorest in society, the people that are really, really struggling.”

In the midst of Centrica's impressive profits, the call for a "social tariff" seems not only necessary but a moral imperative, as the surge in profits raises eyebrows as households continue to bear the brunt of escalating costs.

Are energy companies doing enough to alleviate this burden on consumers, especially those facing financial hardship? The notion that a social tariff is "the best thing we can do for consumers" brings to light the disparity between corporate gains and societal well-being.

In a landscape where the poorest in society are grappling with rising costs across various fronts, O'Shea's focus on fixing the issues within the energy sector is a step in the right direction.

However, it prompts contemplation on whether more comprehensive structural changes are required to ensure the well-being of the most vulnerable individuals.