Annual Profits Of £571m For British Gas
A recent report from energy supplier British Gas has shown that their annual profits have leapt more than six-fold, from £95m to £571 million.
The report hit the news as Centrica, parent company of British Gas, announced a 40% rise in operating profits for 2007 to £1.95bn. The energy firm said lower wholesale gas prices had helped profitability at its British Gas business but that margins were once again tightening.
The announcement came in just weeks after raising gas and electricity prices by 15% for 16 million British Gas customers. Centrica was just one of a number of businesses to hike household prices on both gas and electricity. Rivals Npower and EDF energy followed suit blaming the increase on the rising costs of energy in the wholesale market.
General Secretary for the trade union Unison, Mr Dave Prentis, said the huge profit margin was "obscene". In a statement he went on to say:
"The unjustifiable price increases are burning a huge hole in customers' pockets and causing misery to millions. British Gas should hang their heads in shame knowing that many people, including families, pensioners and the disabled, are too scared to heat their homes adequately this winter, because of the huge bills that follow."
With pre-tax profits from continuing operations in excess of £2.1bn, Centrica said it had worked "diligently" in order to minimise the impact of a 56% rise in wholesale prices. Last summer wholesale prices rose sharply, tracking the oil price, therefore prompting the company to impose its double-digit price increase of last month.
Centrica claims most of its profits were made in the first half of 2007 when wholesale gas prices were falling. Chairman Roger Carr said: "Centrica delivered very strong financial results during another challenging year for UK energy retailers."
But despite falling wholesale prices and a huge profit margin, consumer group Energywatch said that many energy companies including British Gas did not pass on the full reduction to their customers. As a result Energywatch has already called for a Competition Commission investigation into energy supply and the way the energy market works.
According to the consumer group the average gas bill for British Gas customers has risen by 76.7% to £653 since 2003 and electricity bills by 74.3% to an average of £413.
Sam Laidlaw, chief executive at Centrica said the energy company would be using its profits to help reduce the UK's dependence on imported gas.
He said: "We need to earn a return to invest in new sources of energy for the UK. Centrica is investing £1bn a year in new sources of gas and power and all of that requires a return."
Energywatch has also criticised Centrica for rewarding shareholders whilst penalising consumers by increasing its full-year dividend to shareholders by 17% to 13 pence per share.
Adam Scorer, director of campaigns for the consumer group said: "It is perfectly true that there is volatility in wholesale energy markets. But it seems equally true that such volatility hits consumers not shareholders."
"Consumers will feel justified in claiming that they are being taken for a very rough ride by energy companies," he added.
Although last year's price cuts attracted over 200,000 customers to return to British Gas as their energy supplier, Centrica said it was too soon to determine whether the recent price increases would drive them away again.
Published on February 22, 2008
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