Scottish Gas owner Centrica reveals rise in earnings

Scottish Gas has frozen its standard tariff until August. Picture: John Devlin
Scottish Gas has frozen its standard tariff until August. Picture: John Devlin
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Scottish Gas owner Centrica has fuelled further controversy over energy prices after reporting another profit rise at its supply business.

The group said that operating profits at the energy and services arm covering the UK and Ireland rose by 2 per cent to £906 million last year, helping wider group operating profits at Centrica jump 4 per cent to £1.5 billion.

Centrica’s residential energy supply arm – which only covers UK homes – reported an 11 per cent drop in operating profit to £553m, compared with £623m in 2015, but the reduction was due in part to a customer exodus.

More than 409,000 UK home customers left the business in the year to 31 December, marking a 3 per cent fall to 14.25 million, although Centrica said it stemmed the outflow in the second half of the year by launching new tariffs and improving customer service.

READ MORE: Energy giant Centrica to cut 25 jobs in Aberdeen

Revenues for 2016 dropped 3 per cent to £27.1bn, versus £28bn a year earlier, but Centrica swung to a pre-tax profit of £2.2bn after reporting a £1.1bn loss due to a writedown last year.

The energy industry has faced mounting pressure to treat customers fairly and has been criticised for being slow to pass on falls in wholesale gas prices, with consumer groups hitting out at the size and timing of cuts.

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Scottish Gas has already announced it will extend a price freeze on its standard energy tariff until August, “despite increases in external costs”, but customers are expecting prices to soar later this year, following the Brexit-induced collapse of the pound and rising wholesale energy prices.

Energy regulator Ofgem is set to introduce a price cap on prepayment meters in April as part of industry reforms, but has so far stopped short of recommending a broader limit that would affect standard variable tariffs.

Centrica chief executive Iain Conn warned the government against pursuing a price cap.

He said: “We’ve got lots of people moving prices in different directions, we’re freezing ours, other people are putting theirs up. I think this is just a lot of evidence of a market that works.

“You’ve got to be very careful as a government if you want to start to price regulate, because if you start fixing prices, when are you going to stop?”

Scottish Gas is one of three so-called Big Six energy suppliers to have frozen standard tariff prices in recent months, but is still expected to face fresh calls to address tariffs for business and domestic consumers.

Rivals ScottishPower, Npower and EDF have all announced price hikes over the past few months. The government is expected to issue a green paper in the spring aimed at addressing rip-off energy bills.

Centrica kept shareholder payments at 12p a share, saying that it would increase its payout once it reduces debt levels to between £2.5bn and £3bn.

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