British Gas owner Centrica says gas prices on the rise again as it warns on profits

British Gas owner Centrica has told investors it expects profits to come in below target after energy use dropped during the unseasonably warm autumn, and warned gas prices could be on the rise again.
The energy supplier said average residential gas consumption was 17 per cent lower this year compared with a year ago, with electricity usage down by 3 per cent after the unusually warm weather in recent months.

The number of customer accounts has also fallen to 15.9million from 16.1million in the summer after the UK’s biggest energy supplier lifted gas and electricity prices by an average of 18 per cent and 16 per cent respectively from August.

Centrica shares dipped after the announcement and were 3.25p, or 1.1 per cent, lower at 291.55p in early trading today.

Centrica said it now expects operating profits for 2011 will be marginally lower than current market expectations of £2.6billion, a figure which compares with a surplus of £2.4billion in 2010.

Prior to today’s update, analysts had expected a 20 per cent fall in profits at the British Gas Residential business to around £600million.

It said wholesale gas and oil prices were 26 per cent higher this winter than last year and added that its residential business was loss-making prior to the announcement of higher tariffs.

The announcement will send chills down the spines of householders who are already struggling under crippling energy bills. Energy suppliers, including Centrica, are being investigated by regulator over their behaviour around price rises.

Critics says that suppliers are quick to raise bills in response to wholesale price rises, but take far longer to lower bills when costs fall. They also allege that suppliers use complex accounting to reduce residential energy profits so as to avoid accusations of profiteering.

Centrica said that average consumption by business customers has also been affected by the mild weather and weak economic conditions, with a reduction in usage of 15 per cent for gas and 12 per cent for electricity.

In residential services, the number of central heating installations was 10 per cent lower than a year earlier.

While this is better than the overall market, Centrica announced yesterday it will cut around 850 jobs after reviewing resource levels in its services business.
The move is part of an ongoing review to identify cost savings across the group, including in its UK power generation division.

This is Money


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