Profits triple to £3.3bn at British Gas owner after energy prices soaron February 16, 2023 at 2:33 pm

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Chris O’Shea’s comments come after the energy company’s owner Centrica saw its profits triple.

An employee in a British Gas vanImage source, Alamy

British Gas owner Centrica has posted huge profits after oil and gas prices soared last year, sparking renewed calls for energy firms to pay more tax.

Its profits hit £3.3bn for 2022, more than triple the £948m it made in 2021.

Energy firms have seen record profits since oil and gas prices jumped following Russia’s invasion of Ukraine.

The figures come after British Gas was criticised over its use of debt agents to force-fit prepayment meters in the homes of vulnerable customers.

Energy firms have faced huge pressure to pay more tax in the UK on their profits, as many households struggle with higher gas and electricity bills. Shell and BP have reported record profits this year.

The End Fuel Poverty Coalition campaign group said the energy market was “failing consumers and is in desperate need of reform”.

But Centrica boss Chris O’Shea said the company last year invested £75m in supporting customers of British Gas, the UK’s largest electricity and gas supplier, providing “much needed stability and support”.

Windfall tax

Most of Centrica’s bumper profits came from its nuclear and oil and gas business, rather than from the British Gas energy supply business, which contributed just £72m of the £3.3bn profit. The sale of its Spirit Energy oil and gas business in May also boosted the figures.

Due to competition rules, Centrica cannot sell its own gas at a discount to British Gas customers.

In fact, it said British Gas’s profits had decreased by 39% compared with 2021’s levels, largely because of “voluntary donations” to support customers and the repayment of furlough funds from the pandemic.

In addition, Centrica said:

  • It paid about £1bn in tax relating to its 2022 profits.
  • Of that, about £54m was paid as result of the windfall tax – called the Energy Profits Levy – which was introduced by the government last year to recoup some of the “extraordinary” earnings made by firms, and to help fund lower gas and electricity bills for households.
  • Centrica also said it would increase the money it returned to its shareholders, as it launched a £300m share buyback scheme.

Mr O’Shea refused to be drawn on whether he would waive his bonus for the past year, saying it was “too early to have a conversation”. He turned down a £1.1m bonus for the previous financial year.

He is due to receive an annual salary of £794,375 for the past year and Centrica’s annual incentive plan means he could also be eligible for an almost £1.6m bonus if targets are met.

‘Coining it in’

The company’s huge profits have sparked criticism.

Unite general secretary Sharon Graham said Centrica had been “coining it in from our massive energy bills while sending bailiffs to prey on vulnerable consumers the length and breadth of the country”.

Chart showing Centrica profits

Labour’s Shadow Chancellor Rachel Reeves called on the government to “bring in a proper windfall tax on oil and gas giants to stop energy prices rising in April”.

The government’s windfall tax only applies to profits made from extracting UK oil and gas. The current rate is 35%, but oil and gas firms pay an additional 30% in corporation tax and a supplementary 10% rate, taking the total rate to 75%.

However, companies can reduce the amount of tax paid by factoring in losses or spending on things like decommissioning North Sea oil platforms.

It has meant in recent years, the likes of BP and Shell have paid little or no UK tax.

It comes as the government has been forced to step in to help households. It is currently limiting energy bills to £2,500 per year for a typical home, although that is still more than twice what they were before the Ukraine war, with the threshold set to rise to £3,000 in April.

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Analysis box by Simon Jack, business editor

Centrica is really two separate businesses, one of which is making record breaking profits and one which is not.

But taken as a whole people will see a company swimming in cash while hiring debt collection agencies to break into struggling households to fit prepayment meters – prompting understandable anger.

Competition rules prevent Centrica from selling the energy it produces more cheaply to its own retail customers than others, so what does it do with its embarrassment of riches?

It has already suspended the agency involved in the forced prepayment meter fitting. The company also estimates it will pay £2.5bn in windfall tax by 2028, but many will still see that as insufficient.

The problem of how to fix that is a matter for government rather than the likes of Centrica, Shell and BP.

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The results come after the Times newspaper revealed that debt agents working for British Gas had broken into the homes of vulnerable people to force-fit prepayment meters. It has resulted in many more similar incidents being brought to light.

The revelations resulted in Ofgem, the energy watchdog, asking all suppliers to suspend forced prepayment meter installations. Courts in England and Wales also halted applications from firms to install them.

Centrica said it was “extremely disappointed by the allegations” surrounding one of its contractors, Avarto Financial Solutions, and added it was “completing a thorough independent investigation”.

There are more than four million UK households on prepayment meters, which require customers to pay for energy in advance, either through accounts or by adding credit to a card. It is more expensive than paying by direct debit.

However, strict rules are meant to stop suppliers moving at-risk customers onto prepayment meters, amid concerns people may “self disconnect” when they cannot afford to top up.

Smart meter

Image source, Ricky

One British Gas customer Ricky, who lives in Kingston upon Thames, had a prepayment meter force-fitted at his home in November last year.

The 46-year-old suffers from long Covid and is unable to work regularly. He told the BBC he was placed on British Gas’s vulnerable register after they sent him an £800 bill.

But one morning he was woken up by people banging on his front door and shouting. He got to the door and saw a locksmith kneeling down about to break in.

“I was just completely bewildered,” he said. Ricky said a woman from Arvato Financial Solutions handed him a letter which said he had to have a smart prepayment meter fitted.

Ricky said the whole experience was “distressing and degrading” and added he “felt ashamed”.

British Gas said it was “really sorry” to hear about Ricky’s experience and would contact him to “look at how we resolve things”.

Avarto Financial Solutions has refused to comment on the allegations so far.

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