Fury as British Gas makes £50 profit on every house

Sam Laidlaw, Centrica Chief Executive
Sam Laidlaw, Centrica Chief Executive
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BRITISH Gas parent Centrica came under public and political fire today after it revealed it made nearly £50 per household last year just months after hiking customer bills.

A £606 million profit haul at British Gas residential was slammed as “staggering” amid calls for the firm to use some of the cash towards reducing energy bills for its 8.4 million customers.

The 11% rise in profits came after last year’s colder-than-normal weather saw gas use leap 12%, with British Gas making £49 on each average annual dual fuel bill of £1,188.

Its results have raised questions once more over the fairness of energy bill increases after British Gas raised tariffs by 6% at the end of last year.

Centrica also confirmed today that British Gas boss Phil Bentley is quitting at the end of June - and will leave with a combined share, salary and pension package worth around £10 million.

Trade union Unite said the energy regulator should be given more power to ensure utility providers “behave fairly”.

Len McCluskey, Unite general secretary, said: “British Gas’ owner Centrica is making £50 per household in this country - that is staggering.

“These profits will anger a growing number of families who are struggling to pay the bills.

“The price increases in November caused hardship for customers while British Gas bosses boosted their profits and their own bonuses in the process.”

Underlying earnings at the wider Centrica group jumped 14% to £2.7 billion, but Centrica said it paid more than £1 billion in tax and invested £2.7 billion in 2012.

Chief executive Sam Laidlaw insisted the company needed to make a “fair and reasonable return so that we can continue to make our contribution to society and to invest”.

Centrica stressed that British Gas contributes a fifth of total group profits, with 2012 results largely driven by a 20% rise in profits at its upstream gas and oil exploration business to £1.2 billion.

Consumer Focus called for greater transparency between profits and prices earlier this month after utility giant EDF revealed a £1.7 billion earnings haul just two months after raising bills for 3.7 million British households.

Shadow energy and climate change secretary Caroline Flint said it was time for a “complete overhaul of our energy market”.

“People will not understand why, just a few months ago, British Gas claimed they had no option but to put up their prices when now it looks like they’re making huge profits on the back of spiralling bills for hard-pressed consumers,” she added.

British Gas said it was too early to say if customers should be braced for further price hikes this year.

Bosses at the firm said wholesale gas prices appeared “relatively calm”, but added that there were some “upward pressures” in the market after a 13% jump in wholesale gas prices for winter 2012/13.

Its recent price hike led to a number of customers quitting British Gas, which saw residential accounts fall 1.4% to 15.7 million in 2012.

The group’s market share also dropped to 39.9% as it said it was hard to attract new customers amid tough economic conditions.

Wider economic woes resulted in a 10% fall in boiler installations in 2012 as customers reined in spending, while profits at British Gas Business fell 9% to £175 million as firms were also hit.

But British Gas returned to customer account growth in the early weeks of 2013, according to the group.

As part of a strategic overhaul also announced today, Centrica revealed plans to expand further in North America and said it was stepping up its gas production in the UK.

It pulled out of plans earlier this month to build nuclear power stations in Britain with partner EDF, although it still has a 20% stake in British Energy, which owns the country’s existing nuclear power stations.

Centrica said it wants to double profits in the US downstream arm over the next three to five years.

It wants to grow customer accounts and increase production in the US, with more acquisitions on the horizon.

Under a management shake-up following the strategic review, Mr Bentley will not be directly replaced, with US retail boss Chris Weston instead taking on responsibility for all so-called downstream operations, including British Gas Residential in the UK.

Mark Hanafin will lead the international upstream business.

Centrica said Mr Bentley was stepping down after six years in the top job to “pursue his ambition to become a chief executive”.

He will not be paid a lump sum on leaving, but walks away with a package including a £226,200 a year pension and more than two million shares.