British Gas, which trades as Scottish Gas in this country, has posted a 10-fold increase in profits after industry regulator Ofgem relaxed restrictions on how much money energy companies can make from their customers.
Operating profits at British Gas during the year to the end of December surged to £751 million, up from £75m in 2022, after Ofgem increased how much profit suppliers can claim from household bills to make up for costs incurred during the Covid pandemic.
Energy group Centrica, the owner of British Gas and Scottish Gas, said approximately £500m of the hike in profits was a "direct result of the changes Ofgem introduced to allow the recovery of prior period costs through the default price cap". However, profitability more recently has fallen amid sharply lower commodity prices.
READ MORE: Centrica boss renews calls for ‘social tariff’ amid higher British Gas profits
"Without this [change to the default price cap], profit would have been less than half the reported number," Centrica said. "British Gas Energy was loss-making in the second half and profit is down from the £969m reported at interims."
Overall Centrica made a pre-tax profit of £2.8 billion in 2023, down 17% from the £3.3bn posted in the previous year. Chief executive Chris O'Shea said profits are likely to fall further in 2024 as lower commodity prices and reduced volatility suppress earnings.
Even so, the FTSE 100 group has lifted its full year dividend by a third to 4p per share, pushing up the value of the stock by more than 3% in early morning trading.
READ MORE: Scottish Gas owner rakes in "monster profits" of £3.3bn
Julie Palmer, partner at Begbies Traynor, said today's results are "a far cry" from the boom Centrica experienced in 2022 when energy pricing initially shot through the roof following Russia's invasion of Ukraine. However, that will be of little consolation to hard-pressed consumers struggling to pay their bills.
“With a quarter of the UK’s households supplied by British Gas, a performance like this will only intensify the public, regulatory and political pressure that British Gas is facing as families grapple with high energy prices, which is a significant contributor to the current cost of living crisis," Ms Palmer added.
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