British Gas sees profits increase 10-fold

British Gas has announced its profits for 2023 increased 10-fold to £750m.

The supplier said the jump from £72m in 2022 was due to regulator Ofgem allowing it to recover losses of £500m it racked up in the aftermath of Russia's invasion of Ukraine.

While oil and gas firms made record profits when energy prices spiked, suppliers that took on the customers of bust retailers made hefty losses.

Centrica, British Gas's parent company, said its profits fell by 17% to £2.8bn.

The energy giant, which extracts and generates fossil fuels, followed BP and Shell in posting reduced, albeit still large, profits for 2023 due to oil and gas prices falling back on the levels seen in 2022.

Millions of households have been hit by higher electricity and gas bills in recent years. Energy has also been the main driver in the rising cost of living in the UK.

Centrica said its retail business, British Gas, which has 7.5 million customers, made £750m in profits as a result of being allowed by Ofgem, the energy regulator, to claw back £500m in losses.

This was due to the energy price cap, set by regulator Ofgem, including an allowance to compensate energy suppliers for debts on bills that they cannot recover from customers.

It added it did not expect a "repeat" of the benefit in the future.

The losses were incurred due to British Gas, along with several other suppliers, taking on customers and honouring existing contracts when dozens of small energy providers went bust in 2021 when gas prices surged and made price promises to customers undeliverable.

Aarin Chiekrie, equity analyst at investment firm Hargreaves Lansdown, said British Gas's services arm, which includes things such as boiler installations, had been "in a sticky spot in recent years, plagued by scandals and poor customer service levels".

He said customer numbers had fallen by 8% in 2023 as cost-of-living pressures drove customers to search among providers to find the cheapest deals.

But he added the company had "invested heavily in improving its service levels, and it's beginning to show through lower job rescheduling rates and complaints".

Chris O'Shea, chief executive of Centrica, said the company had "done a lot we can be proud of in 2023", adding it had paid more than £1bn in tax.

He renewed calls for a "social tariff" to enable people on lower incomes to pay less for their gas and electricity.

"The poorest in society are really struggling but it's not just the energy. It's energy, it's rent, it's mortgages, it's food and all manner of costs," he said on a call on Thursday.

"What I'm focused on is how do we fix this in energy and that's why we need a social tariff, that's why we need the standing charge to disappear."