British Gas under fire for 'scandalous' 64% profits increase

British Gas under fire for 'scandalous' 64% profits increase

British Gas was in the eye of another storm last night after reporting a 64% increase in annual profits on the back of a major hike in prices for residential customers.

Consumer groups and trade unions joined forces to accuse the company of exploiting homeowners to boost the bottom line results of parent group Centrica.

The energy group yesterday promised no further domestic price rises this year and justified estimated rises of 22% for gas and 18% for electricity since 2003 by saying they had been necessary to keep up with wholesale cost growth.

Operating profits at British Gas rose 64% to £337m, but Centrica's wholesale gas production arm also managed a 19% rise to £573m.

Centrica's overall operating profits increased 16% to £1.2bn, and the dividend was raised 59% to 8.6p for the year.

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Finance director Phil Bentley said it was unfair for British Gas to receive all the flak from consumer groups, arguing this was only because it was more transparent than its rivals. "We are the only ones who front up to profits on our supply business. Why don't people ask what the French and German owners of London Electricity, npower and PowerGen are up to, because they don't publish these figures," he said.

Mr Bentley also accused his competitors of being "disingenuous", saying that they had taken nearly one million customers off British Gas after it put up its domestic prices - but shortly afterwards they raised their own prices.

These arguments cut little ice with consumer group Energywatch, whose chief executive Allan Asher said: "Consumers accept that companies need to make profits. What they won't accept is that the profits come at the expense of consumers, with minimal risk taken by the company."

Alan Tattersall, the head of home services at independent comparison and switching service uSwitch.com, argued it was "disgraceful" that British Gas has been able to squeeze "scandalous" profits out of their customers.

"British Gas has used rising wholesale gas prices as a smokescreen to extract ever increasing margins of profit from their customers. These profits are as a direct result of the record price increases of up to £150 per year that British Gas inflicted on their customers over the course of 2004." The Amicus union said it deplored the scale of profits by British Gas, which were a direct result of the energy price rises already hitting the most vulnerable members of society.

"This just goes to prove that companies are willing to hold the UK public hostage and the fact that we are becoming increasingly dependent on gas-fuelled electricity is a dangerous trend," said Dougie Rooney, Amicus's national officer for energy.

Centrica said the rate at which British Gas was losing customers was slowing, and it had put in place a series of measures to win back those customers who had moved to rivals.

"Its really the time for us to fight back. We would expect to see a net weekly increase in energy customers," said chief executive Roy Gardner.

He believed that 2005 margins were expected to be similar to last year with no let-up in the competitive pressures from wholesale increase. Margins for 2006 would be boosted by cost saving measures.

Centrica would not comment on how negotiations were going to buy a majority stake in Belgian power provider Société Publique d'Electricité, but confirmed it would like to boost its UK generating capacity.

The City reacted in a mixed way to Centrica's performance and its shares rose 3% to 248p but then dropped back to end the day up 3.75p at 237.75p.

"The numbers were slightly ahead of consensus but they're still losing customers," said Nicola Barber, fund manager at Rothschild Private Banking.

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