How on earth British Gas can increase profits tenfold in a cost-of-living crisis?
British Gas owner Centrica has revealed that earnings at its retail supplier business soared by nearly 900%, infuriating people who have struggled with energy bills through the cost of living crisis.
The energy giant said underlying earnings at its gas and electricity supply arm leapt 889% compared to the year earlier.
Centrica swung to a £6.5bn operating profit in the first six months of the year against operating losses of £1.1 billion a year earlier.
The enormous growth in profits has infuriated the public and poverty campaigners pointing out a ten times increase in earnings during an inflation and cost of living crisis fuelled by the change in energy bills is difficult to justify.
British Gas owner Centrica reveals profits soaring more than 900%, (Yahoo Finance, 2 mins)
How much money have they made?
Centrica increased its profits tenfold from £98m last year to £969m this year.
On an underlying basis, operating profits rose to £2.1bn from £1.3bn a year ago.
Other energy companies have also reported a surge in profits in recent months as the rise in wholesale gas prices upended the market.
Competitor Shell recorded record profits of £9bn in the last quarter of 2022 and £7.5bn in the first quarter of 2023, but their most recent accounts showed profits had fallen by around 50% in the second quarter of this year to £5bn as the market stabilised.
Why has British Gas made a record profit? (PA, 2 mins)
How did they do it?
Centrica said £500m of their profits were effectively handed to them by Ofgem.
Ofgem allowed businesses to recoup some losses after prices were capped at £2,500 a year, with British Gas losing £250m in the first half of 2022 due to the price cap coming in lower than the cost it faced in wholesale markets.
The flood of new customers that joined them as many smaller suppliers collapsed also forced them to buy gas at sky-high prices.
As compensation, this year Ofgem allowed them to recoup these costs by adding around £100 to the price cap.
British Gas profits soar by 889% (but not for the reason you might think), (Sky News, 2 mins)
People are angry
Few people will forget last winter when everyone saw their energy bills surge, many saw their provider collapse and even more saw the headlines of people struggling to pick between warmth and food.
Despite the government intervention, many people had a tough winter and the sharp rise in inflation has meant the pain hasn't eased for millions.
The government intervention was also extremely expensive, costing billions with much of this going directly to energy companies.
On top of this, Ofgem is still allowing energy companies to recoup losses from the pandemic and the energy crisis sparked by the war in Ukraine, despite the huge profits.
To see energy companies posting record profits throughout the crisis has left a sour taste in many people's mouths.
Simon Francis, co-ordinator of the End Fuel Poverty Coalition, said: "At a time when household energy debt is spiralling to record levels and energy bills remain double what they were just a few years ago, the profits posted will be greeted with disbelief by those struggling through the crisis."
