British Gas £1bn profits are a ‘gift’ from Ofgem

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Poverty campaigners have criticised British Gas and said the UK’s energy system is broken after the company posted profits of almost £1 billion for the first six months of the year.

British Gas – which supplies 7.52 million households in the UK – said about half of its profits were due to keeping the energy price cap at £2,500 for the average house. The i states the £500 million made because of the price cap equates “to an additional £66.40 for each of the company’s customers, who account for a quarter of all UK households.”

Co-ordinator of the End Fuel Poverty Coalition, Simon Francis said the British Gas profits  “are a further sign of Britain’s broken energy system”.

Francis continued: “At a time when household energy debt is spiralling to record levels and energy bills remain double what they were just a few years ago, the profits posted will be greeted with disbelief by those struggling through the [cost of living] crisis.”

Fuel Poverty Action has called for a new windfall tax on the energy giant’s profits which it says should be used to help households who have fallen into debt because of the high energy prices.

“Ofgem has gifted British Gas an extra £500m by inflating our bills. Instead, the billions gifted to energy firms should be reclaimed by a windfall tax used to write off energy debts,” said Jonathan Bean, head of policy for Fuel Poverty Action.

National Energy Action said 6.6 million UK households remain in fuel poverty, defined as having to spend a disproportionate share of income on heating your home.

British Gas made profits of £969 million – an increase of almost 900% and te company’s highest ever first half profit – between January 1 and June 30, 2023 after the energy price cap rise allowed it to make more money from household bills.

Centrica – the owners of British Gas – in a statement said: “All suppliers had to purchase a portion of their electricity and gas at levels above the price cap.

“Allowances to recover this cost were introduced into the price cap from April 2022, with recovery continuing into the first half of 2023.”

Most of its profits, Centrica said are effectively a form of compensation for having to buy energy at prices above what it could charge customers under the energy price cap.

Centrica has proposed bumping its interim sahre dividend up by a third and on the back of the announcements saw its share price rise more than 4%

Energy industry regulator Ofgem said any changes will take time to come into effect. In a lengthy statement released today (June 27), Ofgem – which sets the price cap – said it is time to consider if the price cap offers the right protections for customers in what is going to continue to be a volatile market following Russia’s invasion of Ukraine and higher demand after the pandemic.

However, while the price of oil and gas have fallen significantly the energy price cap is still £1,000 more than its pre-pandemic levels.

British Gas owners Centrica sparked fury in February when it posted record profits of £3.3 billion – a trebling of its underlying profits. Their previous record profit was £2.7 billion made in 2012.

At the time –just a month after British Gas suspended the forced installation of pre-payment meters after concerns were raised about its methods and also the company’s treatment of vulnerable customers – the then-energy security secretary Grant Shapps said: “These extraordinary profits are a sharp contrast to the high bills the public are facing.

“That’s why the government intervened, adding a new 35% tax on these profits which will contribute to ongoing cost of living support where the government is paying one third of consumer energy bills. But I do think energy companies need to do more too.

“That means offering meaningful redress to the vulnerable people treated so appallingly over the forced fitting of prepayment meters. And it means seeing more of these profits invested in the latest technologies like offshore wind and gas storage which will help tackle climate change, and ultimately help shield their customers from ever-higher bills.”

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