British Gas profits fell by thirty per cent in 2011 due to the rising wholesale cost of gas and lower usage by customers during a warm spring and mild autumn and early part of winter.
British Gas made profits of £522 million for its parent company Centrica. Overall Centrica posted an adjusted operating profit of £2.4 billion helped by £1 billion profit from its upstream UK operations. Centrica’s pretax profit which excludes losses on the way it values some energy contracts increased by 2.5 per cent to £1.25 billion.
The results from British Gas will add fuel to the argument that British Gas could cut fuel bills further and faster. In August it raised gas prices by 18 per cent and electricity prices by 16 per cent, ahead of the winter and associated heavier usage. Comparison site uSwitch estimated that a record 5.5 million UK households are in fuel poverty, defined as spending ten per cent of income on heating and power.
Centrica argue that they had to raise prices because British Gas was operating at a loss for five months due to the rise in wholesale costs.
Centrica chairman Sir Roger Carr said: “In the wake of a 30% increase in wholesale gas prices and escalating losses in British Gas, we were faced with the need to implement a significant price increase, in the knowledge that any rise in the cost of living would be very difficult for hard pressed customers, already struggling in a severe economic downturn.”
Mr Carr said that higher taxes imposed by the government on the production of oil and gas had increased the cost base of its business. This had influenced the cost savings programme it had implemented which saw 2,300 jobs go.
The financial results indicate that the average duel fuel customer saw a drop of £37 annually in energy costs, down to £1,024 for 2011, mainly due to lower usage.
In the event the weather was milder which meant lower usage offset the higher prices and contributed to the reduction in profits for British Gas. In January this year British Gas cut the price of electricity by five per cent.
Centrica chief executive Sam Laidlaw said: “2011 was a tough year, both for Centrica and our customers. But the strength of our integrated business and balance sheet means we’ve been able to take the lead in helping customers through these difficult times, as well as delivering growth and making the investments on which Britain’s energy future depends.”
Centrica accounts support its argument that it is investing heavily in its business to secure gas supplies for the UK for the future. It invested £1.6 billion in 2011 and says it has agreed a further £1.4 billion for 2012.
Centrica has increased the amount it paid in tax from £761 million to £891 million.
Sign up to the Myfinances.co.uk newsletter to receive the latest financial news direct to your inbox.