Centrica. the parent of leading UK supplier British Gas Energy, today posted half year operating profits for 2023’s first six months of £2.1 billion, up 62% on last year’s returns.
British Gas Energy, the group’s supply business serving small firms and households, saw the period’s earnings rocket nearly ninefold, to £0.96 billion.
The declarations sparked fury from consumer organisations, and a renewed call for energy privatisation from the Unite union, a major funder of the Labour party.
Centrica’s defence was that British Gas Energy’s operating profit margins on its domestic accounts in the four years to 2022 stood at only 1.9%, against the notional 2% benchmark assumed by architects of Ofgem’s price cap and government officials design other temporary reliefs.
Describing UK residential sales as “challenging for all suppliers”, Centrica said British Gas Energy had been “the only major supplier to consistently make a profit since the default tariff cap came into effect in 2019”.
“When normalising for costs incurred over this period and recovered only in 2023’s first half”, it added, “this margin would have been over 2%, which compares with the 1.9% margin the price cap is currently designed to give the average supplier.
“This reflects our relative strength, in particular our energy procurement and risk management capabilities”.
While the supplier’s 7.5 million residential accounts changed little on the year – see table -, BGE’s cost of serving them rose 4%. Growing numbers of complaints per household resulted.
Sites served for SME enterprises customers advanced by 10%, to around 529,000.
|British Gas Energy||2023||2022||Change|
|Residential energy customers (‘000) (closing) (i) (ii)||7,492||7,516||(0%)|
|Small business customer sites (‘000) (closing) (i)||529||480||10%|
|Energy complaints per customer (%) (iii)||7.7%||6.6%||1.1ppt|
|Energy Touchpoint NPS (i) (iv)||16||13||3pt|
|Annualised cost per residential energy customer (excl. bad debt) (£) (i)||86||83||4%|
|Adjusted operating profit (£m)||969||98||889%|
“Nothing is more important than delivering for our customers”, said Chris O’Shea, pictured, Centrica’s group CEO.
“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”.
In renewable generation Centrica said it planned to invest between £600m and £800m every year at least until 2028.
“Ramped up” deployment of capital in low carbon and flexible assets would play an key role for UK security of supply and decarbonisation”, the combine said.
Centrica Business Solutions, home to low carbon generation as well as sales to larger corporations “now has over 300MW of assets in detailed planning and delivery phase, in addition to operational capacity of 119MW”, the group told its investors.
Last month the unit saw initial output from its first solar farm, the 18MW venture at Codford in Wiltshire.
Serving little changed volumes of bigger corporates, Centrica Business Solutions still scored a greater than tripling in the period’s operating profit – see table – to £87 million.
|Centrica Business Solutions (CBS)||2023||2022||Change|
|Energy supply total gas and electricity volume (TWh)||11.7||11.8||(1%)|
|Energy supply complaints per customer (%) (i)||7.2%||4.0%||3.2ppt|
|Energy supply Touchpoint NPS (ii) (iii)||25||31||(6pt)|
|Services order intake (£m)||102||114||(11%)|
|Services order book (£m) (ii)||663||670||(1%)|
|Adjusted operating profit (£m)||87||20||335%|
Centrica shares had risen 5% on the London Stock Market by mid-afternoon.
Regulator Ofgem commented that 2023’s first-half figures for the energy industry were a “one-off” and that “we expect profit levels to fall back significantly moving forward”.
Sharon Graham, general secretary of the union Unite, and a major backer of the Labour party, called for suppliers to be nationalised to “protect businesses and households”.
She added: “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.”