Centrica to feel pinch as pre-payment meter prices reduced

BRITAIN’S largest energy supplier is under further pressure after the regulator turned up the heat on its price cap for pre-payment meters and the Government announced a second major review of energy prices.

British Gas, which is owned by Centrica, will bear the brunt of Ofgem’s plan to lower the cap on pre-pay meter energy prices by as much as £19 a year for three million homes due to its high number of customers who pay via meter top-ups. The regulator brought in a price cap for pre-pay customers in April this year as the political appetite to lower bills across the energy market was reignited ahead of the general election. The tighter cap will come in from October, at around the same time that the results of a fresh review into energy supply costs is to be revealed.

Industry analysts said that the prepay cap will not have a material impact on the group’s supply profits but margins will still feel a squeeze as a result of the political pressure on the industry.

Centrica’s shares fell 1.6pc to 196.6p yesterday. The latest industry cost review will be chaired by Dieter Helm, an Oxford University professor, to establish how the energy supply chain can cut costs to lower bills.

The independent review will take place over the next three months alongside the ongoing work of the regulator to determine how to fulfil a Conservative Party manifesto pledge to cap standard variable energy tariffs for the “most vulnerable” in society.

John Musk, an analyst at RBC Capital, dismissed “yet another review” as political “overkill”. He added that Centrica’s profit margins were likely to shrink to the bottom end of its 4pc-6pc post-tax target. Around 377,000 customers abandoned British Gas to take up new deals in the last six months and more are expected to leave after it raised its electricity prices by 12.5pc and its dual fuel tariff by more than 7pc.