British Gas customers 'fleeced' for record profits

Monday, March 01, 2010

British Gas was accused last night of fleecing millions of poor and vulnerable customers as the company announced record-breaking profits of £595 million last year — more than £1.6 million a day.

The announcement from Britain’s biggest utility company, which supplies 15.7 million homes, prompted calls for a competition inquiry amid accusations that it had failed to pass on falls in wholesale gas and electricity prices to consumers last year.

“As British Gas fat cats celebrate huge profits, the most vulnerable people in society are being left out in the cold,” said Steve Bloomfield, national officer for business and environment at Unison, the trade union.

“Raw gas prices have fallen massively, so energy companies are piling on the profits, while fleecing customers. Fuel poverty is rising in the UK and those in most need should be on lower prices.”

As Scotland received further heavy snowfalls yesterday in Britain’s coldest winter in decades, Centrica, the owner of British Gas, said that profits generated by the division increased by 58 per cent last year to £595 million from £376 million in 2008.

But Sam Laidlaw, Centrica’s chief executive, rejected the allegations of profiteering. He said that at 7.6 per cent, profit margins at British Gas were lower than at other well-known British companies, such as 15 per cent at BT and 18 per cent at Vodafone.

“You draw your own conclusions,” he said. “We made £38 per average customer last year after tax . . . I think the market is working fine.” Mr Laidlaw also said that British Gas had cut its prices earlier this month by 7 per cent and was planning to invest £15 billion in new power generating equipment, including wind turbines and nuclear power stations, over the next ten years.

The announcement is unlikely, however, to tame consumer anger at Britain’s “Big Six” energy companies. Earlier this week Ofgem, the industry regulator, said that British Gas, EON, Npower, EDF, Scottish Power and Scottish & Southern Energy were earning their highest profits for five years because of a widening gap between wholesale and consumer prices.

Since summer 2008 wholesale gas prices have fallen from a peak of more than £1 per therm to about 38p, while electricity has dropped from £90 per megawatt hour to around £37.

In contrast, household energy bills are as much as 35-40 per cent higher for gas and 10-15 per cent more for electricity than before the price rises in 2008.

Centrica said that such figures were misleading because it bought only a small amount of gas at “spot” prices. Most of its gas and electricity is purchased on long-term contracts — some lasting 20 years — at a range of different prices.

Philip Cullum, deputy chief executive of Consumer Focus, the customer group, said that the results offered new evidence that Britain’s energy markets should be investigated by competition authorities.

“For consumers, a combination of high prices and cold weather has exacted a heavy cost. Energy companies have taken advantage this winter, while more than six million UK households live in fuel poverty and face a desperate struggle to keep warm.”

Although profits at British Gas were strong last year, they were modestly lower across the Centrica group as the company suffered big falls in earnings from its wholesale energy businesses.

Profits across the group, which also includes a gas production business in the North and Irish seas, wholesale electricity generation and gas storage operations, were down 7 per cent last year at £1.86 billion, compared with more than £2 billion in 2008.

This story was featured on the Business Times website.

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