British Gas reveals record £742m profit
The UK's biggest energy supplier unveiled a record profit haul today just weeks after it hiked bills amid the coldest winter in 100 years.
British Gas, which has nearly 16 million customer accounts, posted a 24% surge in operating profits to £742 million in 2010, two months after the supplier pushed up bills by 7%.
The record takings prompted calls for energy regulator Ofgem, which is leading an investigation into the balance sheets of the major suppliers including Centrica, to refer the sector to the Competition Commission.
Centrica, which also revealed record operating profits of £2.4 billion, up 29%, blamed the price hikes on soaring wholesale prices and said it would create 2,600 jobs in 2011 and commit £15 billion in investment between now and 2020.
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.
Ofgem found average industry margins on a standard dual fuel tariff rose to £90 in November, from £65 in September, prompting an investigation into the "big six" providers. Its findings will be published next month.
But Centrica 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: "The issue is not about one company or one year's profit or loss but it is about whether the energy market is working properly and Ofgem's review must try to answer this question once and for all.
"If the regulator identifies systemic weaknesses in the energy market then it should seriously consider whether a Competition Commission investigation is needed."
He added: "We need successful energy companies but consumers may look at today's profits and at recent prices rises and question how one justifies the other."
But Centrica has defended its stance, claiming to be one of the most transparent of the energy suppliers. It also confirmed that its profit margin was 4% in the second half of 2010, when the supplier saw a 48% decline in profits to £157 million - its lowest second-half profit in three years.
Commenting on today's results, Centrica chief executive Sam Laidlaw said the company's profits were "for a purpose".
Centrica's 2010 performance reflects the first full year's contribution from the acquisition of North Sea gas company Venture and its stake in British Energy, both purchased in 2009. The FTSE 100 firm is now 41% bigger than it was in the previous year.
The company is also committed to investing in its energy networks with more than £15 billion of spending pledged for the next decade on nuclear, wind farms and gas-fired generation. Ofgem has said £200 billion of investment is required between now and 2020 to secure Britain's energy supply.
Centrica yesterday announced a £2 billion deal with Qatar for the supply of enough gas to meet the needs of around 2.5 million UK households. It will also invest £450 million in its Ensign and York gas fields in the southern North Sea.
"If you invest and make acquisitions you would hope to get a record profit," Mr Laidlaw 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."
Centrica announced all dual fuel customers would be eligible for free loft and cavity wall insulation, which it said would help reduce bills. It will create 2,600 skilled jobs in 2011 and plans a further 1,400 jobs in 2012.
The company increased its full-year dividend for shareholders by nearly 12% to 14.3p per share.
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