Centrica on target for 43% boom in profits

Nov 13 2009 by Peter McCusker, The Journal

BRITISH Gas parent Centrica said its residential utility arm was on track to see profits soar by an expected 43% this year, despite a 7% fall in energy consumption.

The group confirmed it was performing in line with market forecasts, which include operating profits of £1.86bn for Centrica and £541m for British Gas, up from £379m the previous year.

British Gas has cut customer bills by 10% this year as wholesale costs have plunged, but there have been concerns that suppliers have not been passing on all the falls in wholesale costs to consumers.

Energy watchdog Ofgem revealed in September that supplier margins between wholesale and retail prices had increased for both gas and electricity to £110 and £80 per customer respectively despite falls in their wholesale prices.

The expected hike in profits at British Gas comes in spite of customers cutting back their usage due to the recession and better energy efficiency.

Its average consumption per customer in the nine months so far dropped by 7% against a year earlier, down further on the 6% fall seen in the first half.

But the number of residential accounts on supply rose by around 200,000 to 15.7 million between June and the end of October.

While the group did not give any clues on future tariffs, recent industry comments have warned that bills will be back on the rise next year.

Scottish & Southern Energy ruled out further cuts yesterday and said it was likely to face pressure to raise prices.

And the major players also cautioned in September about price rises, as they responded to an Ofgem inquiry into whether suppliers have been reducing prices quickly enough.

British Gas confirmed that wholesale gas prices are set to rise from around 31p to 49p for winter 2010/11 and 57p for the following winter.

Wholesale prices are fixed around 18 months to two years in advance, which suppliers argue means that there are often substantial time lags before they pass on changes to customers.

The expected hike in profits at British Gas comes in spite of customers cutting back their usage