Cost of living: British Gas owner gets 900% profit jump

It said the result was buoyed by changes to Ofgem's price cap which allowed it to recoup around £500m by recovering costs from previous periods.

Regulations set a maximum suppliers can charge per unit of energy, and caps level of profits an energy supplier can make to 1.9%.

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From 2021 onward, suppliers had to purchase a portion of their electricity and gas at levels above the price cap due to the increasing cost of energy, but from April 2022 allowances to recover that cost were introduced by the regulator.

Previously suppliers would manage the difference between expensive energy in the winter and cheap energy in the summer on customers’ behalf, charging an average annual price.

However, with winter prices rising to previously unseen levels, Ofgem moved to three-month reviews of the price cap and changed its methodology to allow 'backwardation costs' to be recovered over six months to avoid "further and significant financial pressure on an already strained supply market".

As a result, Centrica said "the positive impact of recovery of prior period costs through price cap allowances in H1 2023 was approximately £500m".

Overall, Centrica swung to a £6.5 billion operating profit in the first six months of the year against operating losses of £1.1 billion a year earlier.

On an underlying basis, operating profits rose to £2.1 billion from £1.3 billion a year ago.

Power To The People, a Scottish campaign group against the energy crisis, said: “This is a cost of greed crisis. Our energy bills are double the rate they were eighteen months ago. We’re paying for their record profits.

“Instead of taking action against profiteering, last October the Government opted to subsidise the energy companies to the tune of £40bn. That’s roughly 50% of what recent estimates suggest it would cost to renationalise the UK’s energy supply.

“The whole energy system is rotten. The solution is clear: Public ownership.”

TUC general secretary Paul Nowak said: “While families across Britain have struggled to pay their bills, energy companies have been allowed to laugh all the way to the bank.

“The government could have imposed a proper windfall tax on excess profits. But instead it has chosen to leave billions on the table.

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“This was a political choice that has benefited shareholders instead of hard-pressed households. Big oil and gas have gotten away with treating the public like a cash machine.

“Our failing energy retail companies should be brought into public ownership. That’s the way to bring down bills and invest in home improvements."

In its last full-year results, published in February, Centrica tripled its profits to a record £3.3bn, though operating profit at the British Gas retail division fell 39 per cent to £72m.

Chris O'Shea, Centrica chief executive said: "Nothing is more important than delivering for our customers – its why we are here. Today's results allow us to increase our customer support package to more than £100m, and the new green investment strategy we've announced will see us invest several billion pounds in the energy transition, creating thousands of new well-paid jobs.

"Our robust balance sheet has allowed us to invest heavily in the UK and Ireland's energy security and will make sure that our customers have cleaner energy at the right price."

Mr O'Shea was criticised by campaigners earlier this year for accepting an annual bonus of £1.4m and a long-term share bonus of £2.3m on top of his £790,000 annual salary.

Simon Francis, co-ordinator of the End Fuel Poverty Coalition, said: “These profits are a further sign of Britain’s broken energy system.

“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.

“There will of course be questions about how these profits were made, but the reality is that energy firms are operating on a playing field set by the Government.”

Unite the Union found in a report in February of this year that public ownership of energy companies could have save nearly £45 billion in 2022 – over £1,800 per household, and that with the ability to freeze energy bills inflation could be 4.1% lower.

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Sharon Graham, General Secretary, Unite said: “British Gas has just reported its highest ever first half year profits, raking in almost £1billion.

"We need to stop dancing around our handbags and grasp the nettle. The only way to end the chaos in our energy supply is staring us in the face - public ownership. It is absolutely affordable. It would protect businesses and households. Put simply, it’s a no brainer.

"Both the Government and Labour need to decide whose side are they on.”

The news came on the same day oil and gas company Shell reported net profits of just over $5bn (£3.9bn) for the three months to the end of June.

That represented a fall of over 50% from its previous results, due to the falling price of oil and gas, but the company said it would still be embarking on a $3bn (£2.3bn) share buyback scheme.

Shadow climate secretary Ed Miliband said: “These figures demonstrate the continuing scandal of the Conservatives’ failure to act on the windfalls of war being pocketed by the oil and gas companies.

“Labour would bring in a proper windfall tax to help tackle the cost-of-living crisis.”