Energylinx News

July 27, 2012

Is British Gas Making Too Much Profit?

British Gas came under heavy fire this week after reporting a 24% rise in its annual profits from 2011.

British Gas, who is the nation's foremost energy supplier, recorded over £742 million in profit last year alone – while its parent company, Centrica, recorded operating profits exceeding £2.3 billion. Amidst this week's government reports indicating that the UK still faces a looming recession, critics are now calling on British Gas and industry regulator OFGEM to slash energy prices on behalf of wary homeowners. Indeed, it cannot be ignored that 2 in 3 British Gas customers were hit with a 7% price hike in December; however, while the company's undeniable profit is instigating numerous demands for a formal enquiry, said attack may or may not be completely warranted.

British Gas currently serves around 12 million homes nationwide, and charges an average household £1,239 annually for gas and electricity – notably lower than the national average of £1,310. That being said, OFGEM reports that over 88% of the average dual fuel energy bill goes directly towards wholesale energy purchase, supply costs and VAT – while another 10% goes towards transmission and distribution. In truth, British Gas makes a profit of no more than £56.83 per household per year.

Admittedly, OFGEM suggests that the average net margin for a typical, standard tariff duel fuel customer is only around £40; therefore, British Gas may be charging customers up to £16 more per year than some other UK energy providers. Yet said margin is undoubtedly redirected into the supplier's uncharacteristically healthy advertising and public service campaigns, which helped to recruit over 267,000 new customers to British Gas in 2011.

Companies as large as British Gas and Centrica will inevitably make an astounding level of profit due entirely to the daunting size of their reach; however, this does not necessarily imply that the two organisations are swindling UK energy customers. Brands in other sectors such as Tesco recorded a profit of £3.9 billion last year – raking in more than £10 million every day. Critics have argued that rising food prices are of equal concern as that of fuel, yet those same critics have simultaneously failed to question the ways in which supermarkets profit off of their customers – regardless of the fact that they most likely profit far more per year from their shoppers than do energy suppliers such as British Gas.

In truth, perhaps British Gas could be charging its customers less than at present – yet they could be also be charging substantially more, as they don't even boast the UK's most expensive energy tariffs. On the other hand, if customers believe that they are indeed being overcharged for their energy bills, they should consider switching suppliers via a 100% free and impartial energy comparison service.

In order to find out if you are overpaying for your energy bills, visit us online at www.energylinx.co.uk.

Posted on July 27, 2012 at 03:26 PM