Big freeze drives up British Gas profits to record £720m

By Sean Poulter for the Daily Mail
Updated: 08:21 EDT, 19 February 2011

British Gas is to announce record annual profits of more than £720m on the back of punishing price increases and the coldest winter in 120 years.

Snow joke: Winter freeze added £80m to gas giant's profits

City analysts believe the 2010 figure will be up by 21% – £130m – on the previous year.

The 'big freeze' is believed to have added £80m to the operating profits of Britain's biggest energy supplier, which has 16 m customers.

British Gas turned the screw on customers by announcing a 7% increase in gas and electricity tariffs just as snow and ice swept across the country. The rise adds about £82 to the typical annual dual-fuel bill, taking it to £1,239.

The operating profits at British Gas's parent company, Centrica, are expected to show an even bigger rise of around 50% to £2.3bn.

The major gas and electricity suppliers are being investigated by industry regulator, Ofgem, over allegations of profiteering. Ofgem is under pressure to order a full Competition Commission inquiry to establish whether ms of British families are being overcharged for heat and light.

Experts at MF Global UK are forecasting British Gas profits of £724m, and believe the high figure will increase the likelihood of a Competition Commission inquiry.

Energy industry expert David Hunter, of M&C Energy Group, added: 'These will be record results, partly as a result of the cold snap in January 2010.'

Mr Hunter said the UK's energy supply was controlled by a 'big six' group of companies, which includes British Gas, which effectively had a stranglehold.

The Government needed to take steps to encourage new firms to enter the market and increase competition, he said. John McShane, managing director of energy analysts Saturn Energy, said: 'We all recognise that we have to pay for the energy we use, but we also want to be sure the price we're paying is a realistic one.

'This isn't just true for domestic consumers – with energy costs catching up or overtaking staff costs for many businesses – it's time for greater transparency all round.

'Ofgem needs to get to the root of these issues and press for the energy producers and suppliers to be more open about costs and margins.'

There are suggestions of a split in government over whether a Competition Commission investigation is needed. Sources suggest the LibDem energy secretary Chris Huhne is in favour, while Conservative ministers are against.

Ann Robinson, the director of consumer policy at uSwitch.com, said: 'The harsh reality is that over three quarters of people have cut down or rationed their energy usage this winter because of cost.

'This is not about energy efficiency – this is about energy rationing and recent price increases will have played a major part in pushing ever more households into this trap.'

Richard Hall, of the official customer body, Consumer Focus, said: 'Consumers will be asking is it fair if British Gas announces bumper profits so soon after customer price rises. It poses awkward questions over whether customers are getting a raw deal.'

British Gas and Centrica will announce their 2010 profits on Thursday. A British Gas spokesman said the most recent price rise came into effect on December 11 and had a relatively small impact on the financial results.