British Gas profits reignite concerns over fuel poverty

British Gas is set to come under fire this week when it reveals a 25 per cent increase in profits at a time when the proportion of residential customers living in fuel poverty is rising and households have faced the biggest drop in disposable incomes since the Second World War.

British Gas is expected to say that it made a profit on the residential part of its UK business of £350 million, up from £280 million last year. It will announce its financial results on Thursday July 26th.

British Gas supplies gas and electricity to around 10 million homes in the UK. 

The announcement will anger many customers who have seen gas and electricity bills double in the last five years. The average dual fuel bill is now £1,345 as a result of the increase in wholesale costs, regulatory requirements, subsidies for using low-carbon technologies and large profits.

The company has also warned that residential customers can expect to see their bills rise further in 2012, by an average of £100.

British Gas’s parent company, Centrica, will defend the profits by saying that it is investing £1.5 billion in the first six months of 2012 to ensure that supplies continue at an affordable level.

Centrica's overall adjusted profits, which financial results from other parts of the business including oil and gas exploration and production as well as supplying North American customers, are expected to have risen by 15 per cent to £1.45 billion.

Household consumption was low over the mild winter but the wet and cold spring and summer has meant usage has been higher than normal.

Research by uSwitch at the end of December 2011 put the number of households living in fuel poverty at 27 per cent throughout the UK, with big regional variations. 16 per cent of households in London were deemed as living in fuel poverty, whilst this increased to 32 per cent of households in Wales.

The rise in fuel poverty prompted the Prime Minister, David Cameron to call a summit where the “big six” suppliers, government, the regulator Ofgem and consumer groups met to discuss ways of helping customers.

This led to changes in the ways bills are presented to make it easier for customers to see exactly what they are spending and to be alerted to cheaper tariffs in a clearer way. However, it did not lead to a fall in prices.

Analysts expect Centrica to announce adjusted earnings for the six months to the end of June 2012 down 25 per cent on the same period in 2011 to £102 million from £137 million.

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