IT IS Centrica’s seeming fate in life to make decent headway in most of its operations here and abroad, only to remain a guaranteed lightning rod for public anger about what are seen as excessive price rises in the British Gas residential business it is best known for.
So it was yesterday as Centrica unveiled an 11 per cent jump in residential energy profits to £606 million just months after hiking customer tariffs by 6 per cent and as a cold winter saw gas usage jump 12 per cent. That tariff rise added £80 a year to the typical bill.
Centrica always responds that it needs its financial strength to cover its rising wholesale energy costs, ongoing investment and to secure future supplies.
And like a host of big, profitable businesses, from banks to distillers, energy companies also are quick to point out the hefty corporation and payroll taxes they pay in Britain.
But it remains a dialogue of the deaf. After a series of apparently glaring disparities between headline profits and inexorable price rises in the energy sector, consumer watchdog Which? says the sector is now rated lower than banks, and on a par with car dealers, in terms of public trust.
To be fair to Centrica and its rivals, some of the upward pressures in wholesale prices look systemic rather than cyclical, in much the same way that a growing middle class in the south and east of the globe is inexorably driving up food prices.
It also faces the twin challenges of meeting lower carbon emissions and coping with the powerful grip of energy-rich nations such as Russia who can manage supply.
In broader corporate terms, Centrica has been a surefooted operator, building up a sizeable and successful North American arm and declining to take part in new nuclear when the financial arithmetic looked more problematic. Profits from all four of Centrica’s business units rose last year, with production being a particularly strong performer.
But none of this will deflect anger that, whichever way you slice it, British Gas has unveiled an 11 per cent increase in profits after a 6 per cent increase in prices.
To consumers, that seems plain wrong. And they have consistently failed to buy into the “wider picture” argument that Centrica and all its UK rivals reach for as their first line of defence.
Adding strength to the voice of shareholders
THE decision by Standard Life Investments to support binding votes on boardroom pay by shareholders is noteworthy.
Last summer, SLI was against the government plan, conceived in the slipstream of the “shareholder spring” that saw a number of leading remuneration committees embarrassed for both their generosity and lack of investor communication skills.
SLI said such binding votes would be impractical. But the fund manager, one of the biggest holders of shares in UK blue-chip businesses, says it is now persuaded that the proposed measures will strengthen investors’ ability to hold boards to account.
That sends a positive message for the idea from an investor bellwether to other institutional investors, and could build momentum behind binding votes.
It is welcome. It always seemed ineffectual that shareholders could embarrass a company in the AGM chamber and in proxy votes on remuneration packages, but with nothing tangible achieved in the end. Teeth will now be added.
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Sunday 19 May 2013
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