Centrica feels the heat after 83% rise in profits from British Gas

Centrica ran into a storm of protest yesterday after it announced an 83 per cent rise in profits from the residential division of British Gas following last year's sharp increases in gas and electricity bills.

Consumer groups and trade unions seized on the £249m profit, accusing the company of profiteering and holding the public hostage. British Gas still supplies about 60 per cent of the domestic market.

The anger was fuelled by a 59 per cent increase in the dividend on top of the £1.26bn Centrica has already returned through special dividends and share buybacks. Overall, the group reported a 16 per cent rise in overall operating profits to £1.23bn. Sir Roy Gardner, Centrica's chief executive, insisted that last year's price increases had been "totally cost reflective" and that even after the rise in profits, British Gas was only making a return of 3p in the pound on its domestic energy supply business.

Last year's price rises came at a cost, with British Gas losing one million customers as households switched to rival suppliers after the 18 per cent rise in bills.

Allan Asher, chief executive of Energywatch, said: "Consumers accept that companies need to make profits. What they won't accept is that profits come at the expense of consumers, with minimal risk taken by the company."

Dougie Rooney, national officer for energy at the trade union Amicus, said: "This just goes to show that companies are willing to hold the UK public hostage."

Centrica said that the 18 per cent increase in bills compared with a 29 per cent rise in wholesale gas costs and that even with the price increase, British Gas's profit margins had only been restored to where they were in 2002. In 2003 its profits fell 38 per cent. "We are not profiteering," said Sir Roy. "But we need to make profits to invest in the future and secure the gas supplies the UK needs."

At the peak of the customer desertion last autumn, British Gas was losing 40,000 to 50,000 domestic accounts a week. This has fallen to fewer than 10,000 a week and British Gas expects to start gaining customers before the end of this year.

The "fightback" campaign includes a new tariff which caps prices for the next three winters, and special offers giving gas and electricity customers free evening and weekend telephone calls and access to its home service boiler cover for a fixed fee.