British Gas owner Centrica has fuelled further controversy over energy prices after reporting another profit rise at its UK supply business.
It said operating profits at the energy and services arm covering the UK and Ireland rose by 2% to £906 million last year from £891 million a year earlier, helping wider group operating profits at Centrica jump 4% to £1.5 billion.
Centrica’s British Gas residential energy supply arm – which only covers UK homes – reported an 11% drop in operating profit to £553 million, compared with £623 million in 2015, but the reduction was due in part to a customer exodus.
More than 409,000 UK home customers left the business in the year to December 31, marking a 3% fall to 14.25 million, though Centrica said it stemmed the outflow in the second half of the year by launching new tariffs and improving customer service.
Revenues for 2016 dropped 3% to £27.1 billion, versus £28 billion a year earlier, but Centrica swung to a pre-tax profit of £2.2 billion, after reporting a £1.1 billion loss due to a writedown last year.
The industry has faced mounting pressure to treat customers fairly and has been criticised for being slow to pass on falls in wholesale gas prices, with consumer groups hitting out at the size and timing of cuts.
British Gas has already announced it will extend a price freeze on its standard energy tariff until August, “despite increases in external costs”, but customers are expecting prices to soar later this year, following the Brexit-induced collapse of the pound and rising wholesale energy prices.
Energy regulator Ofgem is set to introduce a price cap on prepayment meters in April as part of industry reforms, but has so far stopped short of recommending a broader limit that would affect standard variable tariffs.
Group chief executive Iain Conn warned the Government against perusing a price cap.
“We’ve got lots of people moving prices in different directions, we’re freezing ours, other people are putting theirs up. I think this is just a lot of evidence of a market that works,” he said during a media conference call.
“You’ve got to be very careful as a Government if you want to start to price regulate, because if you start fixing prices, when are you going to stop?”
British Gas is one of few so-called Big Six energy suppliers to have frozen prices in recent months, but is still expected to face fresh calls to address tariffs for business and domestic consumers.
Rivals ScottishPower, Npower and EDF have all hiked prices over the past few months.
Energyhelpline co-founder Mark Todd said: “British Gas may have frozen their standard prices till August and have the cheapest big supplier standard tariff right now. But having the cheapest standard tariff in the Big Six is like winning a race at the Snail Olympics. It’s not all that.”
The Government is expected to issue a green paper in the spring aimed at addressing rip-off energy bills.
Disappointment over dividend growth sent Centrica shares to the bottom of the FTSE 100, with shares falling more than 3.8%.
Centrica kept shareholder payments at 12p per share, saying that it would increase its payout once it reduces debt levels to between £2.5 billion and £3 billion.
