British Gas has seen its profits increase tenfold since Ofgem permitted the company to earn more from household bills.
The company, which supplies 10 million British households and businesses reported a record half-year profit of £970m in the first six months 2023.
The earnings were 10 times higher than the £98m earned in the same time period last year, and well above the previous record of £585m.
The increase in energy costs was a £500m result of changes made by the industry regulator to the price cap .
Ofgem increased the amount that suppliers can claim on household bills in order to cover costs incurred due to the pandemic. British Gas was able to recover more costs for taking over customers from failing rivals.
EDF and Scottish Power both reported record profits on Thursday, thanks to Ofgem’s price cap changes.
EDF’s UK earnings jumped 167pc, to €2.2bn, in the first six months of this year. This is an increase of almost 80pc compared to the same period in 2022. EDF credits “allowances under the UK domestic default rate cap”.
The rise in profits came despite the fact that France’s profits dropped by 60pc due to unfavourable market conditions.
Scottish Power’s retail operation, which had a loss the previous year, made a profit of £576m.
Politicians and campaigners were outraged by the surge in profits throughout the industry.
Ed Miliband said that oil and gas companies are “seizing the windfalls from war”, while Liberal Democrat Leader Sir Ed Davey stated that energy companies “rake in incredible profits while millions struggle”.
Chris O’Shea is the chief executive officer of British Gas, Centrica’s parent. He insisted that these large profits were “a one-off”.
He said British Gas “could hardly be accused” of profiteering, given that it’s margins are smaller than supermarkets at around 2pc.
Mr O’Shea pointed out that the company will invest £4bn in green energy, as well as other schemes to increase the UK’s supply security.
Ofgem’s decision to let energy companies charge their customers more has also been questioned.
End Fuel Poverty Coalition said: “The government sets the rules of play for energy companies.”
Ofgem’s spokesperson stated that the increase in profits is temporary, but necessary to compensate for “significant losses and costs they have incurred due to covid over the past few years and the Russian invasion.”
We expect profits to drop back to reasonable, modest levels in line with the price cap. This will prevent future supplier failures that cause disruptions and extra costs to all households.
“Longer term, we need to find new ways to regulate the prices and maintain crucial protections for vulnerable customers.”
Analysts at Cornwall Insight stated that the energy price cap is expected to “remain significantly above prepandemic levels in the near future”.
Amanda Solloway (Minister for Energy Consumers and Affordability) said: “The Government will always ensure that energy markets work for consumers in order to protect them against sky-high bills.
“But we want to see that some of these profits are invested in better services for customers and protections for vulnerable families, and we will work with companies to create a future-proof market.”
Centrica reported adjusted profit of £2.1bn in the year ending June. This is up from £1.3bn one year earlier.
The company announced an extension of a previous buyback by £450m, bringing the total to £1bn.
The reopening off the coasts of Yorkshire of the Rough Gas Storage Facility and its stake in the nuclear power plants also gave it a boost.
Last year, the energy price guarantee of the government protected households from an increase in energy costs. The bill was limited to £2,500.