The regulator has increased the price cap in order to compensate for setting it too low previously. Profits are expected to be six times higher in the second half of this year than they were in the first.
British Gas, which is owned by Centrica and has benefited from the increase in energy prices, will report a record-breaking profit of over £585million for its first half. This puts it on track to a new political storm. The company provides energy to 7.5 million homes and its record profits will reignite the controversy surrounding companies that make huge sums of money at a time where many customers are struggling due to high bills.
Centrica has been criticised for forcing its customers to install prepayment meters after an investigation revealed this.
Centrica announced yesterday that the first-half operating profit for British Gas’ retail division was “expected to be substantially higher than previous years”. Analysts were told that Centrica expected to surpass the £585million British Gas had made in the first six months of 2010 when it was still supplying almost ten millions households. It made £98 million in the first half last year, down from £172 millions in 2021.
Simon Francis, coordinator of the End Fuel Poverty Coalition said: “People are going to be shocked that British Gas, once again, is on course to make huge profits while its customers cut back on essentials.”
Centrica stated that allowances made in the UK default tariff cap for costs incurred prior to the period were the main reason behind the increase.
Ofgem’s estimate of the costs a company with high efficiency should incur led to the energy price cap. The cap was initially set at £4,279 per year for an average household in January, and then increased to £3,280 from April. This included extra allowances for suppliers to compensate them for the cap being set too low.
The first half of household bills were below the cap due to the subsidy provided by the Energy Price Guarantee, which restricted them to £2,500 per year for the typical household. The government then paid the suppliers the difference.
Centrica is also involved in the North Sea oil and natural gas, energy trading, and nuclear power plants. The shares of Centrica closed at 117 3/4p, down by 1/4p or 0.2 percent.
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