British Gas profits up 15%. Energy bill-payers happiness down.
Report suggest that British Gas’ parent company, Centrica will today announce a 15% increase in profits. That’s some feat considering the harsh economic climate. Still, at least customers can be happy knowing that last October’s 6% increase in bills, driving up the average price of an average household bill for a dual fuel customer from £1,260 to £1,336 a year, has gone towards a good cause. Keeping the shareholders happy.
Of course, Centrica are bound to say that they needed the extra cash from householders to invest in the infrastructure of the energy network, into which they put £2.7bn last year. However, net profits are normally those expressed after such expenditure, suggesting this anticipated increase is over and above what was 'needed'.
Last year Ofgem announced proposals to eliminate “poor behaviour” by energy companies by introducing a maximum number of available tariffs and automatic switching to cheaper tariffs. Last week the Government officially put its support behind these proposed meaures, although some argue that the reforms do not go far enough to protect consumers.
But surely, as a private company, British Gas is allowed to make a profit? Wouldn’t be much of a viable investment on the stock market if it didn’t. The point of privatisation was to allow energy companies to work as commercial businesses- streamlining process and, yes, making profit for shareholders. That’s how capitalism works.
For most businesses this is not an issue for consumers- if you don’t like a corporate strategy or can’t afford the product, you simply don’t buy it. The problem with energy companies, of course, is that those who can afford to invest in Centrica Plc are probably not the people who worry about being able to pay their fuel bill. Every winter, thousands of people die at home in the UK from cold, most likely through not putting the heating on. Let's hope those lovely dividends are worth it.