Millions of homeowners face a second rise in the gas and electricity bills this year as British Gas owner Centrica grapples with a slump in its profits.

British Gas customers were dealt a 15 per cent rise in their energy bills in January as the company struggled to deal with the near doubling in the cost of buying gas in the wholesale markets.

That price rise did not go far enough for Centrica however as a trading update revealed that as the continued rise in wholesale gas prices "has caused profit margins in British Gas in the first half of the year to be squeezed to levels below our long run expectations."

British Gas has lost 100,000 customers since the January price rises, leaving total customer base at 15.9 million the company reported today. The group had 17.7 million British Gas customers at the start of 2005.

The loss in customers however will not stop Brtish Gas from hiking its prices again shortly. Centrica warned today in a statement to the stock exchange: "While the current outlook for gas prices does create a challenging environment for energy suppliers, we will take the necessary action to deliver reasonable margins in the retail business."

Centrica is also suffering from being held to about 16 large loss-making energy contracts struck years ago directly with large UK industrial companies. The company previously guided that losses for these contracts would be between £100 million and £200 million this year. The recent hike in wholesale gas prices however means that losses on those contracts are now expected to be "materially higher than previous guidance."

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive