British Gas owner Centrica will fuel anger today over spiralling energy bills by revealing it banked profits of around £1.5bn (€2.2bn) in 2005.
Days after increasing bills for a fourth time in little over two years, the firm is expected to post an 11% hike in profits from £1.36bn (€2bn) a year earlier.
Much of the improvement stems from its gas production and storage operations, with the company likely to point out that residential supply business British Gas made losses of £70m (€102m) for the second half of 2005.
British Gas has failed to fully offset a tripling of wholesale costs since 2003, despite recent hikes in gas and electricity bills for its 17 million customers.
The company has raised household bills by 70% since 2003 – with the latest 22% hike due to kick in on March 1.
Consumer group Energywatch said last week the increase was the “bleakest day yet” in more than two years of spiralling energy prices.
“This is the most serious single event in two years of trauma for energy consumers,” said Energywatch chief executive Allan Asher.
Centrica said the cost of buying gas for 2006 had been 63% higher than in 2005 and 202% greater than in 2003 – sending its residential energy business into the red for the second half of last year.
As a result, full-year profits for the division are estimated to be well below the £242m (€355m) British Gas made last year.
Energy comparison service SimplySwitch said all providers were affected by soaring wholesale prices, but British Gas had put up its bills by the most.
SimplySwitch chief executive Karen Darby said: “As the largest supplier of gas and electricity to UK households, the company has been too slow in finding solutions to reduce costs and has instead passed them directly on to their customers.
“This is not helped by the fact that gas storage facilities in the UK are inadequate. British Gas is now the most expensive supplier for the majority of households in the UK and is relying on customer apathy.”
Centrica, which may announce the successor to outgoing chairman Roy Gardner today, was the fifth supplier to raise prices or announce new tariffs in 2006, following a 14.7% rise in gas bills from EDF earlier last week.
The European Commission and UK regulator Ofgem recently said the lack of open access across continental energy markets had been a key factor behind the shortfall in gas supplies coming into Britain.
The company has invested heavily in upstream assets such as gas fields in an attempt to become less reliant on buying supplies from Europe for its British Gas customers.
Centrica bought stakes in four North Sea gas fields in August for £318.6m (€467m) from US producer Kerr-McGee, and also secured rights to explore for more oil and gas there in future.
The deal came amid rising fears of a supply shortage as North Sea oil and gas stocks dwindle and the UK starts to import more fuel than it sells abroad.
Centrica is expected to offset falling profits at British Gas with a strong performance in its gas production arm. Its storage business is also thought to have had a good year.