Scottish Gas owner defiant over bills

Energy companies are under intense political pressure over bills. Picture: PA
Energy companies are under intense political pressure over bills. Picture: PA
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British Gas owner Centrica has shown little sign of cutting energy tariffs as profits fell and it hit back yesterday at Ofgem over “deficiencies” in analysis which suggested that household margins were set to double.

Chief executive Sam Laidlaw dismissed the regulator’s figures as “theoretical” as the company’s own data suggested profits from each household would be half that estimated by the regulator.

Energy companies are under intense political pressure over bills, with calls for falling wholesale gas and electricity prices to be reflected in customer charges.

But half-year results from British Gas, which trades as Scottish Gas north of the Border, showed its operating profits dropped 26 per cent to £265 million. The wider Centrica group saw adjusted operating profits fall 35 per cent to £1.03 billion.

Latest figures from Ofgem suggest energy suppliers will make a pre-tax profit of £106 per household over the coming year, up from £53 last year.

But according to Centrica, British Gas will make only £40 per household in 2014, or £51 before tax, a 20 per cent fall on last year. Post-tax margins were expected to be 4 per cent, beneath the 4.5 to 5 per cent band it says it needs to support investment in the business.

Mr Laidlaw told BBC Radio 4’s Today programme: “The Ofgem analysis is a theoretical analysis. What we are publishing today is the actual facts. We have been in discussions with Ofgem for a number of years about this methodology, which has its deficiencies and they recognise that it needs to be changed.”

British Gas customers are paying higher tariffs this year after they were hiked by 9.2 per cent last autumn, though the rise was scaled back following the government’s shake-up of so-called green levies on bills.

But Centrica said the average bill was expected to be £90, or 
7 per cent, lower this year, reflecting warmer weather and energy efficiency measures.

The company reiterated that tariffs were not expected to change during 2014, “recognising competitive conditions in the UK energy supply market”.

Chairman Rick Haythornthwaite said there had been challenges “both as a result of the weather and reflecting the wider political environment”.

He paid tribute to the “exceptional leadership” of Mr Laidlaw, who is to retire at the end of this year.

Richard Lloyd, executive director of consumer group Which?, said: “British Gas profits are down because of a warm winter, not lower prices.

“Energy companies must do everything they can to pass on any savings to their customers including falling wholesale and network costs.”

Shadow energy and climate change minister Jonathan Reynolds said: “Ofgem’s forecasts for the industry for the next 12 months are just the latest example of an energy market that is not working.”