British Gas reported a record profit of £969 million for the first half of this year, the energy provider’s owner Centrica said on Thursday.
It’s almost 889 percent more than the profit reported for the same period last year (£98 million).
But the company said more than half of the profit (£500 million) came from a “one-off” recovery of a previous loss through Ofgem’s price cap mechanism.
Chris O’Shea, chief executive of Centrica, said in a statement that the company will increase our customer support package to more than £100 million, and “invest several billion pounds in the energy transition.”
‘One-Off’ Profit
Mr. O'Shea told reporters in a phone call on Thursday morning that British Gas is expected to make “a normalised basis around £150 million to £250 million a year” in the future, “a vast majority” of which would be in the first half of the year.“We would not expect to see profits anywhere near this level from British Gas Energy. It really is a one-off,” he said.
According to Centrica, since energy prices skyrocketed in 2021 after COVID-19 lockdowns, the fixed energy tariff became more expensive, prompting customers to switch their contracts to pay a variable rate tariff, which was capped by Ofgem.
Because the price cap was lower than the cost to buy energy at the time, electricity and gas retailers had to provide energy to variable rate tariff customers at a loss.
Larger companies, including British Gas, also had to pick up stray customers in 2021 after an array of smaller suppliers went bust.
Centrica said the unexpected number of variable rate tariff customers caused British Gas to lose £250 million in the first six months of 2022.
The report said companies started recovering the cost after Ofgem began raising price caps significantly in April 2022, but the pace of the recovery had been slow because the price forecast throughout 2022 had been lower than what it turned out to be.
Overall, Centrica swung to a £6.5 billion operating profit in the first six months of the year against operating losses of £1.1 billion a year earlier.
On an underlying basis, operating profits rose to £2.1 billion from £1.3 billion a year ago.
Meanwhile, oil giant Shell said that it had made $5.1 billion (£3.9 billion) in the three months to the end of June.
Windfall Tax
The figures came as households struggle with increasing food and housing prices, prompting calls for more windfall tax.Accusing the Conservative government of failing to “act on the windfalls of war being pocketed by oil and gas companies,” shadow climate and net zero secretary Ed Miliband said Labour would introduce a “proper windfall tax” on oil companies and promote cheap renewables to bring down bills for households.
The Liberal Democrat leader Sir Ed Davey also said it’s time for “a proper windfall tax to fund the support families desperately need” and a general election.
“It beggars belief that after all these months this Conservative government is still allowing energy firms to rake in extraordinary profits while millions of families struggle,” he said.
Speaking to broadcasters during a visit to a housing development in London, Prime Minister Rishi Sunak said the energy companies have already been taxed for their windfall profit.
“We are now taxing these windfall profits of energy companies and we are using that money to help us pay around half of a typical family’s energy bill, particularly over the last winter,” he said.
“That support has been worth £1,500 to a typical family. It’s support on the scale of the furlough scheme to give people context because I know how important it is for the government and me to ease some of those pressures on the cost of living.
“So that’s what we’re doing, taxing the windfall profits of energy companies and helping to pay around half of a typical family’s energy bill,” he said.
Mr. Sunak introduced a 25 percent windfall tax on oil and gas producers when he was chancellor last year after resisting the pressure from Labour and The Liberal Democrats to do so.
The rate was increased to 35 percent earlier this year, bringing the total tax rate to 75 percent, although businesses can also save 91p in tax for every pound they invest in the UK.
