British Gas owner Centrica said on Wednesday it would raise gas and electricity prices for households by 35% and 9%, respectively, citing high wholesale gas prices.
The company, the biggest household supplier in the country with over 16 million customers, said profits at its British Gas Residential unit had fallen 69% in the H1, while wholesale prices for the coming winter are up nearly 90% on the previous year.
Centrica shares closed up 2.7% at 318.75 pence, valuing the business at £11.8 billion. It is the second time this year the company has hiked bills, having announced further double-digit percentage increases in January. „We very much regret that we have had to make this decision at a time when many household budgets are already under pressure,” British Gas Managing Director Phil Bentley said in a statement.
Centrica is the second of the six major suppliers to the market to raise prices in less than a week, after French supplier EDF Energy hiked gas and electricity bills 22% and 17%, respectively, on Friday. The other four are expected to follow suit before the winter. They are RWE-owned nPower, Iberdrola-owned Scottish Power, E.ON UK and Scottish&Southern Energy. The trend of repeated rounds of price hikes by the main suppliers trying to pass on higher costs was criticized in a report by British members of parliament on Monday, which said the market did not operate efficiently and that it was easy for companies to predict what their rivals were going to do.
The Centrica hikes, which are 25% for customers who buy both gas and electricity from Centrica, will come in with immediate effect. The company guaranteed not to make any further rises before the end of the year. Consumer body Energywatch was furious. „It’s the consumer’s bottom line that matters to us, not Centrica’s. At a time when suppliers have been complaining about higher costs and difficult times, customers may be looking with some interest at the Centrica profit statement tomorrow morning,” said director of campaigns Adam Scorer.
Centrica will report H1 results on Thursday. It said on Wednesday that the residential division, which accounts for about 20% of the company as a whole, made operating profit of £166 million in the period, down from 533 million last year and with a margin of 4.3%. A similar margin is now expected for the H2. Colin Pollock, an analyst at Credit Suisse, said Centrica was raising prices at the retail division to meet full-year results forecasts. „The tariff increases that Centrica has implemented Wednesday are broadly consistent with achieving consensus expectations for the residential energy business,” he said. (Reuters)