British Gas owner expects profits to rise 43% as winter gas prices are hiked

Published 12th Nov 2009

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


British Gas parent Centrica today 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.

Today's third-quarter update also saw Centrica reiterate that it was on track to deliver more than £100m in cost savings at British Gas, which it hopes to partly reinvest in the business.

It is rolling out smart meters and developing new capabilities, such as micro-generation.

Elsewhere in the Centrica business, it said production fell by 50% year-on-year in the third quarter as it tapped cheaper wholesale markets to hold on to its reserves.

Full-year gas production is expected to be down by a quarter as a result, which will lead to profits from the so-called upstream business being less than half of those in 2008, said Centrica.

Source: ' Guardian '

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