BOSSES at British Gas parent Centrica have warned political intervention and threats of price controls increase the chance of “the lights going out” in Britain after the group revealed a customer exodus and falling residential energy profits.
Rick Haythornthwaite, new chairman of Centrica, said political moves such as Labour leader Ed Miliband’s pledge to freeze prices if the party wins power were “immensely damaging” and threatened crucial investment in the country’s energy market.
The firm, whose British Gas arm trades as Scottish Gas north of the Border, said it lost more than 360,000 gas and electricity customer accounts last year, down 2 per cent to 15.3 million, as households switched to cheaper rivals after it hiked prices by 9.2 per cent on average from November, as part of a round of winter bill rises across the industry.
The group has shed around another 100,000 accounts so far this year, but said customer switching was “stabilising” after scaling back its price rise by 3.2 per cent following a shake-up of the government’s so-called green levies on bills.
Centrica reported a “difficult” set of annual figures as it said profits from its residential energy arm dropped 6 per cent to £571 million after rising wholesale prices and a milder winter, which meant households have not had to turn up the heating.
Mr Haythornthwaite said: “I think the reputation of Britain as a place in which to invest is under threat and the time to correct that is now, not after the 2015 election, by which time the possibility of the lights going out in Britain will be looming much larger.”
He said he was not scaremongering, adding: “We’ve got to restart collaborative, constructive dialogue around these key issues. We cannot afford to wait – hostilities have got to cease.”
Last night, Neil Findlay MSP, Scottish Labour health spokesman, accused Mr Haythornthwaite of “scaremongering” while many cash-strapped families were facing financial hardship from energy costs.
He said: “These comments are a slap in the face to the thousands of Scottish families who have to make the choice between heating and eating as a result of Centrica’s massive price hikes. This type of scaremongering from a company which is still making in excess of £570m in profits is exactly why people should vote Labour to back Ed Miliband’s pledge to freeze energy prices and why the energy market needs reformed.”
British Gas said it was “confident we can go back to customer growth”, helped by the recent launch of new fixed-price deals.Across the group, operating profits were 2 per cent lower at £2.7 billion last year.
Critics rounded on the group despite the drop in earnings, with shadow energy and climate change secretary Caroline Flint attacking “profits on the back of spiralling bills for hard-pressed consumers”.
Lobby groups called for regulators to deliver better competition in the market and consider a full-scale investigation.
Adam Scorer, director of Consumer Futures, said: “Anger won’t help consumers, only action to reduce their exposure to rising prices. Ofgem needs to deliver vigorous competition in the market – or refer it to the Competition Commission.”
Centrica’s shares have plunged by more than a fifth since the autumn following Labour’s price-freeze pledge, with the stock driven down further after Energy Secretary Ed Davey recently called for a full inquiry into the energy market that could see British Gas broken up.
In a letter, Mr Davey urged competition authorities to “think radically” as they consider whether to launch a probe. He has raised concerns over Centrica’s dominance in the gas supply market, querying why its margins were several times higher than for electricity, and claiming consumers could save £40 a year if they were brought in line.
British Gas revealed profit margins for its gas business stood at 8.9 per cent in 2013 – far higher than the 0.8 per cent electricity margin. But outgoing finance director Nick Luff denied the group was taking advantage of its market-leading position.
He said: “Scale does give us an advantage in terms of costs, which means we can offer good service and prices to our customers, but it doesn’t give us an advantage that means other suppliers can’t compete with us.”
Mr Luff said the firm “can’t make promises” on prices for the year ahead, but added it would look to keep tariffs “as low as we can for as long as we can”. It said this year’s milder winter weather was likely to see bills come down by 9 per cent or 10 per cent.
Centrica’s results show higher wholesale prices and unseasonably warm weather at the end of last year saw British Gas suffer an 18 per cent slump in profit in the final six months of 2013.
A spokesman for Ofgem said: “Several of the big suppliers are seeing customers leave them in large numbers.”
Funnel your anger into shopping around for a better deal
THE announcement of Centrica’s profits will inevitably cause more anger at a time when it’s cold outside and so many consumers in Scotland are already struggling to pay their fuel bills.
Consumers can use their anger as a prompt to shop around for a better deal and make their homes more energy-efficient. There is still a significant amount of money to be saved from getting the cheapest energy tariff out there.
We would urge anyone worried about their energy costs to shop around for the best deal using a recognised price comparison website and to ensure they are on the cheapest payment method, such as direct debit.
There are also many discounted insulation and heating measures available from the Scottish Government’s home energy hotline and we would encourage people to take advantage of this. Making changes at home can really make a difference here. A trained adviser can carry out a home energy check, give you expert energy-saving advice and tell you what support you are eligible for. More of us are eligible for help than you might think, so it really is worth calling 0808 808 2282 to find out more.
But more important and urgent than ever, we need real action to greatly reduce exposure to rising prices for all consumers. The UK government should either scrap the carbon floor price or use the millions of pounds in proceeds to fund a much more ambitious energy efficiency programme.
Consumer Futures is a member of The Energy Bill Revolution campaign – an alliance of organisations calling on the UK government to make home energy efficiency a key priority in big infrastructure investment, helping to cut fuel poverty. The regulator, Ofgem, needs to deliver vigorous competition in the market – or refer it to the Competition Commission if it cannot.
• Tricia McAuley is Director for Scotland, Consumer Futures