British Gas has been the subject of intense scrutiny after unveiling soaring profits on Thursday morning, which came largely on the back of bill hikes.
Centrica PLC (LSE:CNA)’s retail arm penned an 889% jump in pre-tax profit to £969mln at the half-year stage, thanks to Ofgem allowing suppliers to charge more on bills so early energy-crisis losses could be recouped.
Though boss Chris O’Shea described the jump as a “significant one-off,” critics have been quick to slate the company given consumers’ already squeezed pockets.
“Centrica won’t be winning a popularity contest with the public anytime soon,” AJ Bell analyst Russ Mould said, “[it] needs to tread carefully given many are struggling to pay bills.”
Hikes in Ofgem’s price cap to £4,279 in January, compared to £1,277 a year earlier, ensured suppliers could recoup losses from when wholesale price rises began to outpace household bills two years ago, meaning unhedged companies faced hefty outflows.
Given this determines how much suppliers charge per unit of energy, household bills soared, with higher wholesale prices indeed making up some of the cap’s price, alongside factors to fund suppliers’ operating costs and policy commitments.
“When looking at profits in the energy retail market, all roads lead back to the price cap,” Uswitch director Richard Neudegg commented.
“The strong supplier profits now possible under the energy price cap […] are driving increasingly fewer incentives for suppliers to innovate and offer cheaper, competitive deals.”
When approached for comment, Centrica reiterated efforts to aid customers and businesses with bills, pointing to a £50mln package announced to Thursday.
Further support for those struggling with bills failed to convince many though, with Greenpeace campaigners slating both the company’s profit and environmental credentials.
“It’s galling for households to see Centrica’s profits increasing tenfold […] while the cost of living crisis continues, and heatwaves and wildfires are raging on,” the group said.
Shareholders are unlikely to be bothered though, Mould added, with FTSE 100-listed Centrica rising over 7% on Thursday morning.