British Gas owner Centrica profits increase to £1.3 billion during energy crisis
Profits have increased five-fold for Centrica during energy crisis
British Gas owner Centrica's half-year profit has soared five-fold to £1.3 billion after energy prices have gone up across households.
While British Gas was dealing with higher energy prices, Centrica have seen increased revenue from investing in other areas.
Centrica's upstream business reached a profit of £906 million in the first six months of the year - an increase of more than 1,100% from the company's nuclear, oil and gas business.
The business has now brought back its dividend to investors, for the first time since 2020, paying 1p per share, which will give the average Centrica shareholder around £100.
Will the profit mean lower household bills?
When asked if Centrica should use some of this cash to help customers who are facing bills of more than £3,800 from January, chief executive Chris O'Shea said that by running British Gas prudently he is saving customers more money.
Without buying its energy in advance, Centrica would have seen a hit of around £4.4 billion, he added.
"I know it's difficult to see the word profits, or dividends, or similar words when people are having a tough time. I'm very conscious of this," Mr O'Shea said.
"Bear in mind, over the next couple of years we are expecting to pay a windfall tax of probably well over £600 million on our UK gas business off the back of the profits that we're seeing, so a lot of this is going back into society."
The profit hike has not come from British Gas.
The profit hike comes from the company's nuclear and oil and gas business, not British Gas.
British Gas performed much worse - its profits hit just £98 million, down 43% compared with the same period a year ago, before the energy crisis had properly bitten.
More than 200,000 customers joined British Gas as some of its rivals went out of business over the period.
The business gained 158,000 new accounts when it took over the responsibility to sell gas and electricity to Together Energy's customers.
Together was one of around 30 suppliers that have collapsed in the last year.
Regulator Ofgem assigned its customers to British Gas.
But the business said it had also managed to attract 46,000 customers during the period, who switched to its services voluntarily.
It came despite the price cap being the cheapest deal on the market, which gives customers little reason to switch.
It has been a busy year for energy suppliers such as British Gas.
Gas prices have hit record highs at several points
Gas prices started rising last summer and have not let up since, hitting record highs several times.
It has put the squeeze on suppliers, especially as almost all of them are banned from passing costs on to customers immediately.
The energy price cap, which limits what suppliers can charge households, takes into account the price of gas on international markets.
But as the price cap was only changed once every six months there was a lag between the gas price that suppliers paid and what they could charge their customers.
Partly as a result of this, many of the energy suppliers that were serving the market a year ago are now out of business.
Ofgem will update the price cap
In response to the crisis, Ofgem will now update the price cap - which puts an upper limit on a supplier's default tariff - every three months.
"The rise in wholesale commodity prices meant that default tariffs remained cheaper than nearly all new fixed-price tariffs," Centrica said.
"This resulted in more customers on default tariffs than we had hedged for, requiring us to purchase more commodity from the market at prices above those allowed with the price caps."
"Price cap allowances have been introduced to compensate for these costs, however this recovery will mostly occur in future periods."
On a call with reporters, Mr O'Shea revealed that the company has already started to do engineering works on the Rough gas storage site in the North Sea.
It is still in talks with the Government to potentially open the site, which could be storing 10 liquid natural gas ships worth of gas by this winter, if all goes to plan. It could then expand further next year.
More on the cost of living:
Interest rates and inflation go up
Inflation rose by 8.8% in the 12 months to January 2023, down from 9.2% in December 2022. With interest rates also rising to 4%, those saving money will earn more interest on their finances, whilst those paying mortgages would pay more interest to the bank.
Energy bills
The price of energy went up incredibly as the cost of living crisis hit, with the gas price spike caused largely by the war in Ukraine. The price cap - which is set by an independent regulator to help offset costs onto customers - was set to rise to £3,549 for an average home in October but a price freeze from the government restricted the typical bill to £2,500. That's still an increase of 27% from the previous energy cap and as it's a cap on unit cost, the more energy you use the higher your bill will be.
Food prices
The cost of a weekly shop also has gone up as a result of the cost of living crisis. As a result of the war in Ukraine, a number of products including cooking oils and wheat have been disrupted. This means that several products are now considerably more expensive, driving bills up for customers.
Prices at the pumps
The average cost of petrol has also rose to unprecedented levels. Supply lines for petrol have been thrown into doubt as a result of the war in Ukraine, as Russia is a large export partner for gas, oil and fuel. In April 2022, the average price for a litre of petrol on the forecourt was 160.2p, whilst a litre of diesel would cost 170.5p. By late June 2022 the price had risen to an average of 190.9p for a litre of unleaded and 198.9p for a litre of diesel. In March 2023 the price wass on average of 147.03 in petrol and 167.04 in diesel.
Average cost of filling up a car with petrol hits £100
On 9th June 2022, the average cost of filling up a car with petrol hit £100 for the first time ever. Diesel had already hit that milestone. It comes as the cost of fuel hit a record high of one pound eighty a litre. The 2p rise was the biggest daily jump in 17 years. Prices have dropped by at least 20p per litre since the high point.
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