CENTRICA, the owner of British Gas, yesterday hit back at allegations of profiteering after it was forced to defend higher operating profits of £1.5 billion.

Sir Roy Gardner, the outgoing chief executive, spent his valedictory results defending the company’s strategy in the face of calls for a boycott of British Gas from consumer groups.

Centrica’s record results came less than a week after the company, already the UK’s most expensive energy supplier, announced that it would have to increase gas prices by 22 per cent. The price increase is the fourth in two years at the company, which supplies more than one in two households.

But Centrica insisted that the increases were not enough to cover soaring wholesale gas prices, which left British Gas with losses of £75 million in the second half of 2005. Annual profits at British Gas were down 63 per cent from £242million in 2004 to £90million.

“We are making a margin of just 1½ per cent, it’s simply not enough if we are to make the investment that is needed in gas infrastructure in this company,” Sir Roy told The Times.

“We have identified £12 billion of investment in pipelines and storage that needs to be made to bring sufficient gas to the UK. We can’t do that if we can’t make a realistic profit. Even the regulator says that a sensible margin would be 5 per cent.”

Centrica said that the cost of buying wholesale gas in 2006 was 63 per cent higher than in 2005 — and some 202 per cent higher than in 2003. It pointed out that if it were to pass on the whole of its increased costs to customers, price rises would have been closer to 50 per cent.

Centrica refused to rule out another increase in prices. It said that it expected to shoulder most of the burden of wholesale price rises in 2006, with margins in the residential supply business likely to remain at about 1½ per cent.

Allen Asher, chief executive of energywatch, the consumer watchdog for gas and electricity, encouraged British Gas customers to desert it in droves and to give it a “bloody nose”.

“Consumers will not tolerate the never-ending cycle of high prices that we are now seeing,” he said. He also called on the Government to examine whether the market structure — which encourages the dominance of six vertically integrated production and supply companies — was serving the consumer well.

Unions, including the GMB, T&G and Amicus, joined in the criticism of Centrica. Dougie Rooney, Amicus national officer, said: “The Government really needs to intervene to exercise proper control over these powerful energy providers who are manipulating the markets and holding the country to ransom.”

Centrica hopes that wholesale gas prices will peak this year and will start to fall in 2007 and 2008.

FRENCH SPARK

EDF, the French electricity giant, made almost twice as much profit as British Gas last year. The company’s net income for the year was €3.24 billion, compared with €1.6 billion last year, largely because of the absence of a writedown related to Latin American and Italian assets in 2004.

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