Energy bill: British Gas may have to up bills as prfits hit
Profits fall for British Gas
Monday, 12 May 2008 10:22
Higher gas bills could be on their way as soaring wholesale prices have hit first half profits at British Gas owner Centrica.
Despite raising prices for domestic customers, the high price of gas, which has doubled in the last year, has kept profits down.
Centrica also suggested more price rises could be on the cards for British Gas customers, saying in its statement: "While the current outlook for gas prices does create a challenging environment for energy suppliers, we will take the necessary action to deliver reasonable margins in the retail business."
Sales of energy accounts slowed following the price rise, which meant that British Gas ended April with 15.9 million customer accounts on supply.
High wholesale gas costs have impacted the legacy industrial and commercial gas sales contracts, Centrica added.
"Losses here are currently expected to be materially higher than previous guidance," the gas and electricity supplier said.
Record oil prices, rising demand in Asia for the available Liquified Natural Gas and a lack of imports from continental Europe are driving the high prices, Centrica said.
Performance across the remainder of the group has been good, Centrica added.
Tim Wolfenden, head of home services at uSwitch.com, explained if Centrica was feeling such acute pressure over pricing then others firms would be in a similar position.
"Suppliers have been holding firm, but the cracks are beginning to show. It's pretty clear that something has to give and that household energy prices are going to be shooting up again this year," he said
"Suppliers usually give consumers breathing space by introducing a couple of smaller price increases rather than hitting households in one fell swoop. The pressure they are under shouldn’t be enough to change this pattern, but it could be enough to force their hand sooner. If it does, bills could hit £1,327 this year rather than next. For consumers this would mean an unprecedented 46 per cent increase in household energy bills in 2008."
High energy prices are a major contributor to inflation, the Bank of England said in its last inflation report.
Sarah Routledge