Record £742m profit for British Gas

Energy giant Centrica stoked anger over energy bills today by revealing that its British Gas residential arm made record profits of £742m last year.

The UK’s biggest gas supplier, which added 267,000 customers in 2010, reported the 24% hike in profits just over a couple of months after the company pushed up energy bills by 7%. BG now has 16 million customer accounts.

Centrica also revealed a record haul, as operating profits surged 29% to £2.4 billion, mainly driven by its gas exploration operations.

The energy giant has put recent price hikes down to soaring wholesale prices and has pledged to create 2,600 jobs in 2011 and spend £15 billion on much-needed investment.

Around eight million British Gas customers were hit with a price hike on December 10, lifting an average customer's dual-fuel bill from £1,157 to £1,239.

The rise came as customers were forced to reach for the thermostat when the coldest weather in 100 years swept the country.

But Centrica also claims British Gas prices were 0.5% lower at the end of 2010 than at the start of the year after the supplier cut bills by 7% in February.

Mike O’Connor, chief executive of watchdog Consumer Focus, said: “We need successful energy companies but consumers may look at today’s profits and at recent price rises and question how one justifies the other.”

However, he added: “British Gas is the only major UK energy supplier that breaks down its results in any great detail. As such it acts as a lightning rod for the industry.”

Commenting on today’s results, Centrica chief executive Sam Laidlaw said “these are profits for a purpose” as the firm pledged to invest £1.7 billion in 2011.

Mr Laidlaw said the acquisition of gas exploration firm Venture and its stake in British Energy meant the company was about 40% bigger in 2010 than in 2009.

“If you invest and make acquisitions you would hope to get a record profit,” he said.

“We’ve much expanded our upstream business. Nuclear is gathering momentum and offshore wind farms continue to be installed.”

Looking at rising bills, Mr Laidlaw said: “We’re in a volatile situation with commodity prices and we will do all we can to keep bills as low as we can.

“Half the costs come from commodity prices, but there’s also the rising cost of transportation and the cost of meeting climate change obligations.”

Mr Laidlaw said all dual-fuel customers would be eligible for free loft and cavity wall insulation, which he said would help reduce bills.

Ofgem, the energy watchdog, is leading an investigation into the energy giants’ balance sheets after discovering average profit margins had increased as companies claimed they had no choice but to lift bills.

Ofgem found average margins on a standard dual-fuel tariff rose to £90 in November, from £65 in September.

Mr Laidlaw confirmed British Gas profit margins were 4% in the second half of 2010, when the supplier reported a 48% decline in profits to £157 million – the company’s lowest second-half profit in three years.