Centrica fuels controversy as profits rise at UK supply business

BRITISH GAS owner Centrica has fuelled further controversy over energy prices after reporting another profit rise at its UK supply business.

It said operating profits at the energy and services arm covering the UK and Ireland rose by two per cent to £906m last year from £891m a year earlier, helping wider group operating profits at Centrica jump four per cent to £1.5bn. Centrica’s British Gas residential energy supply arm – which only covers UK homes – reported an 11 per cent drop in operating profit to £553m, compared with £623m in 2015, but the reduction was due in part to a customer exodus.

More than 409,000 UK home customers left the business in the year to December 31, marking a three per cent fall to 14.25 million, though Centrica said it stemmed the outflow in the second half of the year by launching new tariffs and improving customer service.

Revenues for 2016 dropped three per cent to £27.1bn, versus £28bn a year earlier, but Centrica swung to a pre-tax profit of £2.2bn, after reporting a £1.1bn loss due to a writedown last year.

The industry has faced mounting pressure to treat customers fairly and has been criticised for being slow to pass on falls in wholesale gas prices, with consumer groups hitting out at the size and timing of cuts.

British Gas has already announced it will extend a price freeze on its standard energy tariff until August, “despite increases in external costs”, but customers are expecting prices to soar later this year, following the Brexit-induced collapse of the pound and rising wholesale energy prices.

Energy regulator Ofgem is set to introduce a price cap on prepayment meters in April as part of industry reforms, but has so far stopped short of recommending a broader limit that would affect standard variable tariffs.

Group chief executive Iain Conn said: “We’ve got lots of people moving prices in different directions, we’re freezing ours, other people are putting theirs up. I think this is just a lot of evidence of a market that works. You’ve got to be very careful as a Government if you want to start to price regulate, because if you start fixing prices, when are you going to stop?”