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Cold snap boosts profits at British Gas owner Cold snap boosts profits at British Gas owner
(35 minutes later)
Householders boosted profits for British Gas owner Centrica at the start of the year as consumption jumped by nearly a fifth because of the prolonged cold snap. British Gas-owner Centrica enjoyed a huge boost from the cold snap, as consumers turned up the heating, driving consumption up by almost a fifth compared with last year.
But the energy company, which raised prices by 6% in December, just before the harsh weather set in, said that instead of pocketing the extra earnings it would use them to prevent any further price increases "for as long as possible". The company, which raised prices by 6% shortly before the harsh winter set in, said any benefit from the "exceptionally cold weather" would be used to prevent further price rises "for as long as possible".
Centrica faces protests at its annual meeting on Monday afternoon. Members of Fuel Poverty Action, the Greater London Pensioners' Association and Disabled People Against Cuts will gather outside the meeting in Westminster,to challenge the company on price hikes, multimillion pound payouts to British Gas bosses, and plans for a new generation of gas power stations instead of cheaper, clean renewable energy. Finance director Nick Luff said: "The fact is we make a margin selling gas. We will have made a higher margin because of the extra volume and we will use that to keep prices down during the rest of the year."
In a trading update ahead of the meeting, Centrica said its British Gas residential business was on course to deliver full-year profits in line with expectations of £602m – slightly down on last year due to higher costs. But he said the cost of implementing the government's energy efficiency scheme and higher transport costs would hit profits, while the gas price remains unpredictable – meaning there may be little extra to invest in keeping prices low.
It said: "Against a background of sustained cold weather and periods of higher commodity prices, Centrica has performed well in the year to date." Energy comparison and switching service uSwitch.com still welcomed the news at a time when consumers are struggling to pay bills. Ann Robinson, director of consumer policy at uSwitch.com, says: "British Gas has recognised the pressure facing customers and is using the financial gain from the extended cold weather to maintain its competitiveness. In plain English, this means that British Gas customers should expect no further increase in prices at least for the foreseeable future."
The company said UK customers had increased by 28,000 over the first four months of the year due to "a competitive pricing position and continued good levels of customer service", and revealed the major impact of freezing conditions on its revenues at the start of 2013. Centrica faces protests at its annual meeting in London on Monday afternoon, as campaigners gather to challenge the company on price hikes, multimillion pound payouts to British Gas bosses, and plans for a new generation of gas power stations instead of cheaper, clean renewable energy.
"As a result of the unusual period of extended cold weather, average residential gas consumption was 18% higher in the first four months of 2013 than in the same period in 2012, and average residential electricity consumption was 3% higher," it said. Households' average gas consumption was 18% higher in the first four months of 2013, compared with the same period last year, while electricity consumption was 3% higher. Residential customers in the UK also rose by 28,000 in the first four months of the year, which Centrica put down to competitive pricing and good customer service.
"Recognising the economic pressures facing many of our customers, the board has determined that any benefit arising from the exceptionally cold weather will be used to maintain our price competitiveness. The company said this "strong performance" put it on course to meet expectations and deliver full-year profits before tax of £602m, down 1% on last year.
"As a result of this decision, we expect the residential energy supply business to deliver an operating profit for the full year in line with expectations, weighted towards the first half." As an oil and gas producer, Centrica also benefited from higher commodity prices, and the group's full-year earnings after tax are expected to be 2% higher at £1.4bn.
A spokesman said: "We will use that to effectively hold prices for as long as possible."