Business

British Gas Profits Soar Near 900% Amid UK’s Cost-of-Living Crisis - No ‘Meaningful Competition’

By Belal Awad · August 1, 2023

British energy companies are reporting record profits amid a grinding cost-of-living crisis, sparking outrage and calls for an overhaul of the nation’s energy markets. British Gas, owned by Centrica, reported mid-year profits of £2.1 billion, nearly double the same period last year. The company’s profits from supplying household energy alone rose to £969 million, a tenfold increase from a year ago.

The soaring profits have been attributed to changes in the price cap imposed by the UK regulator, Office of Gas and Electricity Markets (Ofgem). While the price-cap changes were designed to help suppliers recoup losses incurred over the past four years, consumer groups say the regulatory measures have not worked, insisting the current system be scrapped.

“There isn’t actually any meaningful competition at the moment,” Richard Neudegg, Director of Regulation, Compliance and Policy at Uswitch, told Sky News. He added that although Ofgem is now allowing more margin in the price cap, there is little opportunity for better deals to be offered for consumers.

The new windfall tax on excess profits has cost Centrica £373 million in the first six months of 2023. However, with falling oil prices, the windfall may diminish. Shell’s six-month profits, for example, have halved due to the drop in oil prices.

The debate over what constitutes a fair price and reasonable profit in the UK’s privatized utility system rages on. Ed Miliband, Shadow Secretary for Climate Change and Net Zero, chastised the government for failing to act on the windfalls being pocketed by oil and gas companies. He called for a more aggressive windfall tax to tackle the cost-of-living crisis, telling Channel 4: “You’ve got Centrica, Shell, EDF, making huge profits from generation. Lots of those profits are from very, very high oil and gas prices, which have been driven up by Russia’s invasion of Ukraine. These are unearned, unexpected profits.”

Miliband also took issue with decisions made by Ofgem, saying, “There are real questions for the regulator here because the regulator has made a number of decisions… It’s not at all clear to me when you look at the scale of profits that are being made, that that was the right decision.”

Meanwhile, UK energy companies continue to report record profits as the nation’s cost-of-living crisis deepens. Analysts believe the situation may come to a head later this year as Conservative PM Rishi Sunak searches for a workable balance between free markets and fair pricing.