Energy firm Centrica’s record profits down to ‘market failure’, say campaigners

The British Gas owner is the latest energy company to record a bumper year.

British Gas owner Centrica said its profits have more than tripled in the last year while many UK families struggle to pay energy bills (PA) (PA Wire)

Centrica’s record profits are a result of “market failure” in the energy sector, campaigners have said.

The owner of British Gas said its profits more than tripled in 2022 to £3.3 billion, from £948 million in 2021.

Its announcement comes soon after energy regulator Ofgem opened an urgent inquiry into the company force-fitting prepayment meters in the homes of vulnerable customers unable to pay their bills.

Andrew Simms of the Rapid Transition Alliance said: “Given energy markets are mature, from an economic point of view profits on this scale only occur as a result of market failure.

“The profits do not result from any great business skill, but are a virtually untaxed windfall, a type of profiteering from global events, and because fossil fuel companies are not paying for the environmental and health damage caused by their product.”

The energy market is failing consumers and is in desperate need of reform

Simon Francis, End Fuel Poverty Coalition

Shell and BP have also reported record profits this year stoked by the sharp rise in gas prices since the Russian invasion of Ukraine.

The announcements have led to calls for a tougher windfall tax at a time when the rising cost of energy is becoming unaffordable for many vulnerable consumers.

Simon Francis, co-ordinator of the End Fuel Poverty Coalition, said of Centrica: “The profits of this firm are built on the backs of older people, young families and the disabled suffering in cold, damp homes this winter.

“While the firm expresses disappointment at the prepayment meters scandal, their report says nothing about compensating those whose homes were broken into by British Gas agents to fit a more expensive meter.

“The energy market is failing consumers and is in desperate need of reform. It must better protect the most vulnerable and ensure everyone can benefit from increasing supplies of cheap, renewable energy.”

Greenpeace UK’s head of UK climate, Mel Evans, added: “As families up and down the country are plunged further into fuel poverty, record energy company profits line the pockets of wealthy shareholders.

“Much of Centrica’s obscene profits are coming from energy trading, but the windfall tax doesn’t cover this, nor the profits from gas-fired power stations.

“The Government should expand the windfall tax immediately and use the money to fund home insulation, energy bill support and green heat. If they did, they could tackle the energy, climate and cost-of-living crises at the same time.”

Centrica said it paid nearly £1 billion in tax relating to 2022 profits but expressed plans to boost its share buyback programme by another £300 million and pay out a full-year dividend of 3p a share.

Share buyback allows companies to repurchase their own shares from the open market and create more demand and therefore higher value on the remaining stock, as well as being a way to retain overall ownership of the company and return more money in dividends.

Mr Simms said: “Because fossil fuel companies are heavily subsidised by the UK tax regime and able to write-off profits against further spending on exploration and production, this acts as a huge disincentive to make the urgent and overdue rapid transition to renewables.

“Oil and gas companies like Centrica, Shell and BP are converting a liveable climate into massive, unearned profit, acting like cash dispensers for a wealthy, global minority at the cost of preserving basic livelihoods for the majority.

“The fact this is happening also in the face of widespread, severe fuel poverty demonstrates how perfectly broken is the economic model. Not only do tax regimes need reform, but we also need a Fossil Fuel Non-Proliferation Treaty.”