British Gas' profits plummet 30%, but it's not all bad

British Gas’ pre-tax profits fell 30% fall last year, according to new figures.

The energy giant made an operating profit of £522 million in 2011, down from £742 million in 2010 – equal to around £52 a year per household, British Gas said.

British Gas’ parent company Centrica, however, announced a 1% increase in its operating profit, bringing it to £2.4 billion.

Centrica also reported a 33% rise in its UK upstream profit – the provision of gas and power – which price comparison website uSwitch said suggests a significant increase in profits at the wholesale end of the company.

Just two days ago British Gas promised to pay £50 to anyone who referred a vulnerable customer for free loft or cavity wall insulation.

Sam Laidlaw, Centrica’s chief executive, described 2011 as a tough year for both Centrica and its customers.

Laidlaw said sharply rising wholesale prices in the first half of the year meant the UK energy supply business had become loss making, forcing British Gas to hike customer bills. 

Record mild weather in both Spring and Autumn, meanwhile, led to a 21% and 4% reduction in average household gas and electricity usage respectively, he added.

‘As a result, the average domestic customer bill was some 4% lower in 2011 than the year before, despite the increase in unit prices,’ Laidlaw said.

British Gas also lost some 100,000 customer accounts in 2011.

According to uSwitch, however, the real reason average household energy consumption is down is the high cost of energy.

British Gas hiked its prices twice last year, pushing the average household bill up to £1,286 a year – though a 5% cut to electricity prices last month has bought this down slightly to £1,260.  A year ago the average annual bill was £1,100.

British Gas' average annual household bills

*After price cut came into effect on 12 January

Source: uSwitch

Ann Robinson, director of consumer policy at uSwitch, today urged the Big Six energy companies to cut their prices again.

‘Energy companies are now enjoying lower wholesale prices which will be helping their bottom lines – they should now consider passing this benefit on to their customers at the earliest possible opportunity,’ she said.

The news comes just one week after EDF Energy revealed that its income had trebled in 2011 profits, while Scottish and Southern announced it too expects to see an increase in profits for the financial year ending in March.

Consumer Focus, meanwhile, is calling on the the Big Six energy companies to be more transparent.

'As long as the market is not felt to be fully transparent, consumers will continue to question every price rise, every profit statement and every explanation as to why bills are so high,' said Adam Scorer, director of policy and external affairs at Consumer Focus. 

Shares in Centrica (CNA.L) rose 2.70p, or 0.92%, to 296.20p on the news.