As customers feel the pinch, energy firms' profits surge

British Gas expected to make 30% more than last year after keeping tariffs high despite plummeting costs

Britain's two domestically-owned energy giants, British Gas and Scottish & Southern, are expected to report significantly higher profits to the City in coming months as they reap the benefits of high retail prices.

Next month Scottish & Southern will announce half year profits much greater than the same period last year, when it made £302m. In February, profits at Centrica's British Gas business are expected to rise by at least 32 per cent from last year's £379m to £500m.

Both companies insisted yesterday that the higher profits followed a poor year last year when they kept back some of a spectacular surge in wholesale prices from customers. However the profits rises are likely to prompt fresh demands for price cuts.

The Independent launched a campaign this week against the Great Energy Rip-Off, calling for lower prices and regulatory action against firms that withhold cuts in wholesale prices.

Although the regulator Ofgem last year cleared suppliers of artificially inflating retail prices, a study by the publicly funded watchdog Consumer Focus this year suggested they were overcharging average users by £96 a year.

David Hunter, an expert at Britain's biggest independent energy analyst, estimated bills were at least 10 per cent too high, or £120 a year.

By buying cheap wholesale energy, two new companies First:Utility and OVO Energy have entered the market in the past month with cut-price internet deals of £954 and £978 respectively. Some 1.3 million customers are on relatively cheap internet tariffs with the Big Six costing between £961 and £1,009. However 95 per cent of homes are on a Big Six direct debt, standard or pre-payment tariff averaging between £1,140 and £1,240.

Four of Britain's energy suppliers – Npower, E.ON, EDF Energy and ScottishPower – are owned by foreign utility giants, who have been accused of treating the UK like a "Treasure Island".

With the exception of EDF Energy, direct debit tariffs with the British-owned companies Scottish & Southern and British Gas, are cheaper than their foreign-owned competitors.

However because of the difficulty of tracking profits from Big Six suppliers within Continental empires, the UK-owned firms give the best clue about the profitability of the UK energy market, even though their margins may be lower.

According to one forecast, Scottish & Southern's interim profits will be £600m, double last year's figure.

Last night S&S declined to comment in detail because it has entered its closed period, but it confirmed its numbers would be "significantly higher".

Referring to its previous statements to the Stock Exchange, spokesman Justyn Smith said: "As stated on 23 July and again on 28 September, SSE's adjusted profit before tax for the six months to 30 September 2009 is expected to be significantly higher than in the same six months in 2008, when it was exceptionally low.

"It is very misleading to suggest that all profit comes from the energy supply business," he said, adding that 38 per cent of profits were unrelated to household supply.

Stockbrokers are forecasting British Gas profits of £500m, the second highest profit the firm would have made in the last five years. In the past five years, its results have ranged from £90m to £571m. In a statement to the Stock Exchange in July, Centrica revealed that in the first half of the year operating profits at British Gas jumped 56 per cent to £476m as a result of low wholesale prices and high winter demand.

Mish Tullar, Centrica's group media relations director, dismissed any suggestion that British Gas was making excessive profits. A forecast profit margin of 6.5 per cent, he said, was the same as Tesco, and below the 11 per cent for oil giant BP and 15.2 per cent for Sky.

Price comparison websites are urging households to switch to a better deal. Internet tariffs, where bills are emailed rather than posted, are cheapest, averaging £990 a year.

Scott Byrom, utilities manager at, said: "It is crucial that consumers find the best energy tariff for their region and usage now to safeguard themselves against receiving expensive winter bills.

"If still languishing on a standard tariff, by moving to an online deal they could save £240 a year."

Save up to £380 by switching your energy provider with Independent Compare

Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Trainee Health & Safety Consultant

£16000 - £20000 per annum: Recruitment Genius: A fantastic and exciting opport...

Recruitment Genius: Project and Quality Manager

£28000 - £32000 per annum: Recruitment Genius: This company is an independent ...

Recruitment Genius: Trainee Sales Executive - OTE £20,625

£14625 - £20625 per annum: Recruitment Genius: This role is for an enthusiasti...

Guru Careers: Financial Controller

£45 - £55k DOE: Guru Careers: A Financial Controller is required to join a suc...

Day In a Page

Mullah Omar, creator of the Taliban, is dead... for the fourth time

Mullah Omar, creator of the Taliban, is dead... again

I was once told that intelligence services declare their enemies dead to provoke them into popping up their heads and revealing their location, says Robert Fisk
Margaret Attwood on climate change: 'Time is running out for our fragile, Goldilocks planet'

Margaret Attwood on climate change

The author looks back on what she wrote about oil in 2009, and reflects on how the conversation has changed in a mere six years
New Dr Seuss manuscript discovered: What Pet Should I Get? goes on sale this week

New Dr Seuss manuscript discovered

What Pet Should I Get? goes on sale this week
Oculus Rift and the lonely cartoon hedgehog who could become the first ever virtual reality movie star

The cartoon hedgehog leading the way into a whole new reality

Virtual reality is the 'next chapter' of entertainment. Tim Walker gives it a try
Ants have unique ability to switch between individual and collective action, says study

Secrets of ants' teamwork revealed

The insects have an almost unique ability to switch between individual and collective action
Donovan interview: The singer is releasing a greatest hits album to mark his 50th year in folk

Donovan marks his 50th year in folk

The singer tells Nick Duerden about receiving death threats, why the world is 'mentally ill', and how he can write a song about anything, from ecology to crumpets
Let's Race simulator: Ultra-realistic technology recreates thrill of the Formula One circuit

Simulator recreates thrill of F1 circuit

Rory Buckeridge gets behind the wheel and explains how it works
Twitter accused of 'Facebookisation' over plans to overhaul reverse-chronological timeline

Twitter accused of 'Facebookisation'

Facebook exasperates its users by deciding which posts they can and can’t see. So why has Twitter announced plans to do the same?
Jane Birkin asks Hermès to rename bag - but what else could the fashion house call it?

Jane Birkin asks Hermès to rename bag

The star was shocked by a Peta investigation into the exotic skins trade
10 best waterproof mascaras

Whatever the weather: 10 best waterproof mascaras

We found lash-enhancing beauties that won’t budge no matter what you throw at them
Diego Costa biography: Chelsea striker's route to the top - from those who shared his journey

Diego Costa: I go to war. You come with me...

Chelsea's rampaging striker had to fight his way from a poor city in Brazil to life at the top of the Premier League. A new book speaks to those who shared his journey
Ashes 2015: England show the mettle to strike back hard in third Test

England show the mettle to strike back hard in third Test

The biggest problem facing them in Birmingham was the recovery of the zeitgeist that drained so quickly under the weight of Australian runs at Lord's, says Kevin Garside
Women's Open 2015: Charley Hull - 'I know I'm a good golfer but I'm also just a person'

Charley Hull: 'I know I'm a good golfer but I'm also just a person'

British teen keeps her feet on ground ahead of Women's Open
Turkey's conflict with Kurdish guerrillas in Iraq can benefit Isis in Syria

Turkey's conflict with Kurdish guerrillas in Iraq can benefit Isis in Syria

Turkish President Erdogan could benefit politically from the targeting of the PKK, says Patrick Cockburn
Yvette Cooper: Our choice is years of Tory rule under Jeremy Corbyn or a return to a Labour government

Our choice is years of Tory rule under Corbyn or a return to a Labour government

Yvette Cooper urged Labour members to 'get serious' about the next general election rather than become 'a protest movement'