British Gas: Anger as energy bill change leads to record profits

There has been an angry reaction to British Gas reporting record half-year profits as millions of households continue to struggle to pay for energy costs.

British Gas reported profits of £969m after price cap rises allowed it to make more money from household bills.

Regulator Ofgem said the bumper profits were a “one-off” due to the changes.

But poverty campaigners said the profits “are a further sign of Britain’s broken energy system”.

Simon Francis, coordinator of the End Fuel Poverty Coalition, said: “At a time when household energy debt is spiralling to record levels and energy bills remain double what they were just a few years ago, the profits posted will be greeted with disbelief by those struggling through the crisis.

“There will of course be questions about how these profits were made, but the reality is that energy firms are operating on a playing field set by the government.”

About half of the profit – £500m – was due to changes to the price cap made by the energy regulator. By comparison, British Gas reported a profit of £98m in the same period the year before.

Ofgem had raised how much suppliers can claim from household bills to make up for costs incurred during the pandemic.

It said bumper profits for energy suppliers in the first half of the year would be a “one-off” as they recoup “significant costs” from the impact of the Covid pandemic and Russia’s invasion of Ukraine, and that profits would then “fall back significantly”.

The energy price cap stayed roughly the same until August 2021, when it began to rise.

There was a big hike in April 2022, and it then rose sharply until January 2023 before falling back.

On average, in 2022 suppliers made a shortfall per dual fuel customer due to the cap, but in the first half of 2023, the higher cap gave them a benefit of about £100 a customer.

Households were protected from the full rise in the cap by the government’s energy price guarantee, which ran from October to June and limited typical annual bills to £2,500.

Ofgem said that billpayers, and taxpayers via government subsidies, had “supported the sector and its customers as prices rose and costs spiralled”, adding that firms should not pay dividends to shareholders unless they are “financially robust”.

The owner of British Gas, Centrica, reported underlying operating profits of £2.1bn for the first six months of the year, up from £1.3bn a year earlier.

Centrica has proposed a 33% hike in dividends and a £450m extension of share buybacks.

Labour’s shadow climate and net zero secretary, Ed Miliband, said that energy firm profits “demonstrate the continuing scandal of the Tory failure to act on the windfalls of war being pocketed by the oil and gas companies”.

“Instead of asking energy giants to be nice, [Chancellor] Jeremy Hunt should be fixing the gaping loopholes in the windfall tax on oil and gas profits,” he added.

Also calling for windfall tax reform, Liberal Democrat leader Ed Davey said it “beggars belief” that the “out of touch and failing” government is “still allowing energy firms to rake in extraordinary profits while millions of families struggle”.

Price comparison site Uswitch said the “strong” profits were linked to a “failing price cap”, adding that it was stifling competition.

It means suppliers have less reason “to innovate and offer cheaper, competitive deals that could bring prices down,” said Richard Neudegg, Uswitch director of regulation.

Analysts Cornwall Insight said the energy price cap “is expected to remain significantly above pre-pandemic levels for the foreseeable future”.

Energy firms have continued to make big profits from oil and gas, even though energy prices are not as high as they were last year.

Russia’s invasion of Ukraine in 2022 pushed up oil and gas prices and led to energy firms making record profits.

Oil and gas giant Shell said profits fell to $5bn (£3.9bn) in the April-to-June period, partly due to the fall in prices.

Shell said it had also been selling less oil and gas and making lower profits on refining.

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