British Gas has sparked outrage as it announced record half-year profits, totaling £969m, while millions of households continue to grapple with soaring energy bills. The price cap increases drove the surge in profits, allowing the company to capitalize on higher household bills. Regulator Ofgem contends that the bumper results are a “one-off” due to recent changes. However, campaigners see it as a glaring indication of the broken energy system in Britain.
Simon Francis, coordinator of the End Fuel Poverty Coalition, expressed disbelief at the posted profits, stating that energy firms are operating under a playing field set by the government. Centrica, the owner of British Gas, argued that the profits merely reflect the recovery of past incurred costs.
How Ofgem price cap has changed
More on Ofgem’s energy price cap
Nearly half of British Gas’s profits, £500m, were attributed to changes made by the energy regulator to the price cap. In contrast, the company reported a profit of £98m during the same period last year. Other major energy suppliers also enjoyed substantial increases in profits, taking advantage of the price cap changes.
Scottish Power, which faced a significant loss last year, rebounded with profits of £576m in its retail division. Meanwhile, France’s EDF witnessed a surge in earnings from £740m to £1.95bn for its British operations, which include nuclear and wind power generation.
The surge in profits came as the energy regulator raised the amount that suppliers can claim from household bills to compensate for pandemic-related costs. Nevertheless, Ofgem asserted that the bumper profits in the first half of the year would be a temporary event as energy firms recoup significant costs from the pandemic’s impact and Russia’s invasion of Ukraine. It expects profits to fall back significantly in the future.
Although the government’s energy price guarantee provided some protection for households, campaigners argue that billpayers and taxpayers have been supporting the sector and its customers as prices rose and costs increased. They emphasized that firms should refrain from paying dividends to shareholders unless they are financially robust.
Centrica reported underlying operating profits of £2.1bn for the first six months of the year, up from £1.3bn a year earlier. The company proposed a 33% increase in dividends and a £450m extension of share buybacks.
Prime Minister’s Reaction
Prime Minister Rishi Sunak defended the windfall tax on energy firms, stating that it helped pay around half of a typical family’s energy bill, providing support worth £1,500 per family. However, Labour’s shadow climate and net zero secretary, Ed Miliband, criticized the profits, calling it a scandal of the government’s failure to act on the windfalls of war pocketed by oil and gas companies.
The Energy and Climate Intelligence Unit and other experts have pointed out the government’s prioritization of oil and gas over cheaper renewables, despite public demand for more action on climate change.
As energy firms continue to enjoy significant profits, the energy price cap is expected to remain considerably higher than pre-pandemic levels for the foreseeable future. The situation has raised concerns about the government’s approach to the energy sector, which analysts believe should prioritize renewable sources.
