British Gas owner Centrica has sparked outrage by revealing a staggering 889% surge in earnings at its gas and electricity supply arm compared to the previous year. The energy giant swung from a £1.1 billion operating loss to a £6.5 billion operating profit in the first half of this year. Leaving the public and poverty campaigners questioning the justification for such enormous growth in profits.
Centrica’s profits skyrocketed from £98 million last year to an eye-watering £969 million this year, representing a tenfold increase. On an underlying basis, operating profits also climbed significantly, rising to £2.1 billion from £1.3 billion the previous year.
Similar trends have been observed across the energy sector, with other companies reporting surges in profits. The recent rise in wholesale gas prices sent shockwaves through the market. Rival energy company Shell, for instance, recorded record profits of £9 billion in the final quarter of 2022 and £7.5 billion in the first quarter of 2023. However, their latest accounts showed a subsequent decline of around 50% in the second quarter of this year to £5 billion as the market stabilised.
Cost-of-Living Crisis Continues Amid Inflation Surge
The increase in Centrica’s profits has been attributed, in part, to a decision by Ofgem, the UK’s energy regulator. It allowed businesses to recoup losses after capping prices at £2,500 per year. As a result, British Gas received £500 million in earnings, with the price cap coming in lower than the cost it faced in wholesale markets. Leading to a £250 million loss in the first half of 2022. Additionally, the company faced increased costs due to the influx of new customers after numerous smaller suppliers collapsed. Forcing British Gas to purchase gas at exorbitant prices. Ofgem’s compensation measure allowed Centrica to add around £100 to the price cap to recoup these expenses.
While the government intervened in response to the energy crisis, many households still faced a tough winter. The recent surge in inflation has further exacerbated the financial strain for millions of people. Memories of last winter’s energy bill surge, supplier collapse, and heart-wrenching headlines of families grappling with choosing between warmth and food remain vivid, adding to the public’s frustration with the substantial profits reported by Centrica.