British Gas: higher prices, higher profits

British Gas’ residential arm has reported an 11% rise in annual profits, after an exceptionally cold year saw gas consumption go up by 12%. The energy supplier made, on average, £49 per household in 2012, amounting to profits of £606m. Moreover, British Gas’ parent company Centrica reported its total operating profits were up 14%, hitting a hefty £2.7bn.

Set against a background of record levels of fuel poverty, and the prospect of further price hikes, the release of these figures comes just months after British Gas increased its energy prices by 6% – adding £80 to the average annual dual fuel bill. British Gas boss Phil Bentley last week also announced that he will leave Centrica at the end of June, with a cushy £10m package. It comes as no surprise then that many consumers are finding such news increasingly difficult to swallow.

However, last year was not an across-the-board financial success for British Gas; its business arm saw a £17m drop in profit from £192m in 2011, to £175m in 2012. Centrica cited the ‘weak economy’ as the reason behind this 9% fall, with more and more businesses looking to cut costs wherever possible.

With the hope of mitigating the public backlash against their profit announcement, British Gas were quick to stress that the 6% winter rise in their prices was significantly lower than the price rises of their competitors. Explaining the rise, Chief Executive Sam Laidlaw said that “higher wholesale energy costs, government-driven green energy costs and the imposition of additional infrastructure charges” were to blame. Some might be left wondering why these costs couldn’t be better accommodated by the company’s wide profit margins.

The discontent of customers is undeniable, but at least one consumer group has highlighted the importance of having highly profitable energy companies in the UK, which need to invest in our ailing energy system. On the face of it this makes sense, especially given Ofgem’s latest warnings that a lack of new development could lead to future blackouts. Yet despite investing in some wind farms, British Gas has withdrawn from new nuclear and has vowed not to build new gas power stations for at least four years.

An obvious conclusion from all this would be that big energy companies are more focused on lining their wallets than keeping their customers happy (and warm). This might not come as news to most of us, but it underlines a growing importance of finding the best deal for customers – and there really are significant savings to be made. If you’re looking for  a better deal on your energy bills, click to find out more about how you can switch energy supplier with Energy Switcheroo.