British Gas posts record profits

British Gas stoked the row over profiteering in the energy industry by posting record-breaking profits of £595m for 2009. Britain's biggest gas and electricity supplier saw its profits jump by 58% last year, beating City expectations. The news came as charities claim that energy providers have failed to cut their prices sufficiently following the slump in wholesale energy prices during the recession. This beat the previous record of £573m set in 2007, and came despite a 7% drop in gas consumption. Overall revenues rose by 3%, but the key to the increased profitability was a surge in operating margins to 7.6%, from 4.8% in 2008. This followed a 45% plunge in the cost of buying gas to supply to consumers. British Gas said the average bill was "slightly higher" than the previous year - when consumers were hit by rapidly rising bills . It also said that unusually cold weather in January, February and December 2009 had helped to push up demand. Ann Robinson, director of consumer policy at uSwitch.com, said it was obvious that energy suppliers were reaping the benefits of cheaper oil and gas. Yesterday Scottish Power said its profits in 2009 rose by 7.9%. "With Britain's biggest supplier reporting a 58% increase in residential profits in the same week that Ofgem, the industry regulator, reported an estimated £30 increase in suppliers' margins [on the average bill] , the weight of evidence in favour of further price cuts is stacking up," said Robinson. Ed Miliband, the energy minister, agreed that companies needed to cut prices further. "British Gas has made a start in cutting prices and we want to see other companies following suit, as well as seeing more reductions from British Gas," said Miliband. The Liberal Democrats claimed that Britain's six major domestic energy providers were guilty of "predatory activities". "These massive profits show that the energy companies are out of control and their regulator is out of action," said Simon Hughes. Hughes proposed that energy firms should be forced to print the amount of profit they make on every fuel bill. Centrica, which owns British Gas, defended the profits. It pointed out that it announced a 7% cut in gas prices earlier this month. Finance director Nick Luff said this made British Gas "the cheapest major supplier of gas and power to the residential market". Robinson agreed there was "overwhelming evidence" that the other five energy suppliers need to also cut their prices. But she also warned that, even if they copied British Gas's lead, average bills will still be £281 higher than two years ago. There are fears that many families, especially the elderly and vulnerable, where unable to afford to heat their homes during the recent bout of cold weather that gripped the country. Michelle Mitchell, charity director of Age Concern and Help the Aged, urged the government to introduce a new system of mandatory social tariffs to protect lower-income households from fluctuating prices. Luff declined to predict how British Gas's prices might move in 2010. The total number of British Gas customers rose by 141,000 during 2009 to 15.7 million. It admitted that it has seen a rise in bad debts during the year. Shares in Centrica rose by 2.35% by midday, to 278.45p. Overall, the company reported a 7% drop in adjusted operating profits to £1.85bn. Its "upstream" division, which extracts gas and oil, suffered from the drop in wholesale energy prices.