British Gas warns of rise in utility bills despite £585m profits this year

British Gas claimed today it would hold off from increasing utility bills as long as possible, hours after almost doubling profits in the first half of the year. The largest supplier of electricity and gas in the UK said that if recent increases in the cost of energy continued, customers would have to pay more. Nick Luff, the finance director of parent company Centrica, said energy costs for this winter and next year had risen significantly. "This potentially could have implications on retail prices," he said. "But we are looking to sustain the strong price position we have for as long as we can." A consumer group said customers would be outraged if British Gas raised bills this winter. Consumer Focus said its huge profits this year would sound alarm bells that suppliers were benefiting most from falls in the wholesale cost of energy. Audrey Gallacher, head of energy policy at Consumer Focus, said: "We are concerned that energy firms may actually raise prices this winter. With only small price cuts for customers in the last two years, despite wholesale prices being half what they were at their peak and beginning to fall again, customers will rightly be outraged if this happens. " British Gas, which offers the cheapest combined electricity and gas tariff on the market, made pre-tax profits of £585m for the first six months of the year, up 98% on last year. Following the coldest winter in 30 years, it enjoyed an operating margin of 13%, which equates to about £153 profit for each standard dual-fuel customer and is almost twice its target. Executives said it would make much smaller profits in the second half of the year, after it became the first supplier to cut prices in February and because energy costs have begun to rise. British Gas acts as a bellwether on utility bills as it tends to lead the industry in raising or cutting prices. Industry watchers pay close attention to its comments for indications about the next price move. Sam Laidlaw, chief executive of British Gas parent company Centrica, also appeared to set himself at odds with the government over the construction of a new generation of new nuclear reactors. Last year Centrica paid £2.3bn for a 20% stake in nuclear generator British Energy. But the industry says it is not economic to build new reactors under the UK's current energy regime. Companies such as Centrica and its partner EDF have successfully lobbied for the government to guarantee a minimum carbon price, similar to a carbon tax, which would make low-carbon forms of generation such as reactors more competitive compared to dirtier coal and gas plants. But Laidlaw said other "support mechanisms" were also needed. These could include capacity payments or a special feed-in tariff for reactors guaranteeing them an above-market rate for the electricity they generated, he said. Chris Huhne, the Liberal Democrat energy secretary, has promised that new reactors will not be built with public subsidy. This week he said it was inappropriate for the public sector to support the nuclear industry, as it did for renewables, because it was a mature technology. Laidlaw denied such support mechanisms for the nuclear industry amounted to a subsidy because consumers, and not the taxpayer, would foot the bill. "All low-carbon technologies with the exception of nuclear enjoy some form of support mechanism.You have to level the playing field. It's not about subsidising nuclear if you're discriminating against it."