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British Gas tariffs to be pegged

The owner of British Gas has said it will leave energy tariffs unchanged this year despite a squeeze on profitability at its household supply business.

Centrica shares opened 4% lower as it revealed that group profits will be lower than expected, partly due to the impact of the mild winter on consumption and the loss of 180,000 residential accounts in the year to date.

It expects residential supply revenues to be around 10% below 2013 levels and margins to be around 4%, which is lower than last year's figure of 4.5% and below the level it believes is required to underpin investment.

The company said: "Assuming that energy market conditions remain benign, and recognising the competitive conditions in the UK energy supply market, we do not currently expect to change our residential energy prices during 2014."

It said the average British Gas residential energy bill was around 10% lower this winter than last, with average consumption of gas and electricity down by 25% and 10% respectively in the first four months of the year.

The company, which finished last year with 15.2 million customer accounts, said competition was fierce, particularly from smaller suppliers who are benefiting from an exemption from some environmental obligations.

It said market prices for gas and electricity have declined since the start of the year but it expects upward pressure next year from increasing network charges and higher costs associated with renewable energy.

Rival energy supplier SSE has already pledged to freeze household gas and electricity prices until January 2016 amid intense political lobbying on energy companies over rising bills and profits.

The move came as Ofgem asked for an investigation by the Competition and Markets Authority to ''consider once and for all" whether there are barriers to competition in the industry.

Profits from Centrica's r esidential energy arm dropped 6% to £571 million last year due to rising wholesale prices and a milder winter.

The firm lost more than 360,000 gas and electricity customer accounts last year as households switched to cheaper rivals after it hiked prices by 9.2% on average from November as part of winter bill rises in the industry.

Across the group, operating profits were 2% lower at £2.7 billion last year. Earnings per share have been at 26.6p for the last two years but today Centrica said the figure was expected to be in the range of 22p to 23p.

Meanwhile, Centrica said it will look to sell three of its larger gas-fired power stations as part of a strategy of focusing on smaller, more flexible sites.

The stations at Langage in Devon and South Humber Bank and Killingholme in North Lincolnshire operate in the open market but have low levels of utilisation. The current value of the sites is about £500 million.

Centrica will now focus on three remaining gas-fired power stations at Peterborough, Barry, and Glanford Brigg in North Lincolnshire, which offer greater flexibility in the market.

Chief executive Sam Laidlaw said investment in security of supply remains a key priority for the company.

He said: "We continue to invest in new sources of gas for the UK and we have commitments totalling around £60 billion to help secure energy for our customers."


From Belfast Telegraph