British Gas chief issues profits warning in ‘unprecedented times’ for UK energy sector

 

Sam Laidlaw, Chief Executive, Centrica
Sam Laidlaw, Chief Executive, Centrica

 Centrica – the Big Six energy company which owns and operates British Gas and Scottish Gas – has today issued a profits warning in ‘these unprecedented times for the UK energy sector.”

Residential gas demand from its consumers rose by 4% over the first 10 months of this year compared to last year as  a result of periods of prolonged cold weather in the first half of 2013.

Last year, British Gas reported an 11% increase in profits to more than £600 million.

But despite this, Centrica chief executive Sam Laidlaw said today that British Gas “was loss-making for a number of months.”

He said: “Recognising the pressure on household budgets, we took the initial decision to use any benefit arising from the increase in consumption to absorb higher costs faced by the business for as long as possible.

“However, given the increase in external costs, British Gas Residential was loss-making for a number of months and we therefore took the decision to increase our domestic gas and electricity tariffs.”

Centrica’s controversial announcement to raise domestic gas and electricity prices by 8.4% and 10.4% respectively for more than 15 million residential consumers takes effect next week (23 November).

Laidlaw explained: “In British Gas Business, challenging market conditions, and our decision to end the auto-rollover of contracts for the benefit of our customers, continue to put margins under pressure.  As a result full year profitability is expected to be significantly lower than in 2012.

These are unprecedented times for the energy sector in the UK, with intense public and political debate over rising bills. 

“This is happening at a time when the costs of securing and supplying energy are increasing, due to higher wholesale commodity prices, rising charges for transporting energy to the home and the increasing cost of meeting environmental and social obligations. With household incomes under pressure, affordability is understandably the key concern for our customers.

“At the same time, investor confidence has been damaged and there is increased uncertainty over investment in the energy infrastructure that the UK needs.  Energy suppliers and politicians both have a role to play in helping to minimise the impact of higher costs on bills and improving transparency to restore trust in the industry.

“However market conditions remain challenging, particularly in business energy supply in both the UK and the US, in UK gas-fired power generation and in UK gas storage”

.* Centrica is due to release its Preliminary Results for the year ended 31 December 2013 on 20 February 2014.

Pixie Energy

Pixie logo Pixie Energy is an incubator and a facilitator of strategic research and project work, focusing on energy regulation, policy and markets at the local and national level. Find out more about Pixie Energy here.

Local Energy Matters: Scotland

Local Energy Matters: Scotland is a free-to-download brochure with a focus on energy tariffs in the two Scottish electricity distribution regions, as well news on local energy and low-carbon schemes.

Previous editions can be download here.

Scottish energy market overview

You can read an overview of the Scottish energy market here.

Scottish Government energy feed