Business

Energy firm boss defends profits as charities predict tough winter for families

The boss of the UK’s largest household energy supplier has been forced to defend record profits amid warnings of worse times ahead for household bills this winter.

In evidence to the energy security and net zero committee of MPs, the chief executive of British Gas parent firm Centrica, Chris O’Shea, insisted the 889% surge in profits for the first half of this year were not a consequence of rip-off bills.

He explained it reflected a one-off recovery, under the price cap mechanism, of additional wholesale energy costs the company had been forced to pay for in the wake of Russia’s invasion of Ukraine when prices hit unprecedented levels.

The committee had earlier heard from a string of charities and consumer interest groups, with one pointing to more than 4,700 people in Britain dying last winter from the effects of lack of household heating.

Simon Francis, co-ordinator at the End Fuel Poverty Coalition, backed assertions that millions of households faced a tougher winter than last given many were now laden with debt.

Asked how he could sleep at night because “people are dying”, Mr O’Shea said that 10% of British Gas profits had been voluntarily given to help vulnerable customers and small firms.

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Price cap future in focus amid call for social tariff

Those representing consumers recommended direct, early support for vulnerable families through their energy bills given the continuing, and evolving, challenges posed by the wider cost of living crisis.

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One suggested a priority support channel to be opened with suppliers so they could handle urgent cases in a more timely manner given frustrations over call waiting times.

The energy regulator told Sky News last month that it would be “helpful” if the government brought back household energy support, fully withdrawn in July, due to persistently high bills that risked plunging more households into the red.

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Energy price cap falls from October

The energy price cap is currently predicted to rise back above the annual average £2,000 level from January due to expected hikes to wholesale costs for the season of peak demand.

These could be exacerbated by shocks in an already squeezed market.

Looming strike action at a major Chevron liquefied natural gas operation in Australia is already affecting wholesale prices, with experts warning of potential knock-on effects for global deliveries in the event of extended walkouts.

At the same time, unlike last winter, National Grid has no coal-fired back-up to call upon should energy resources become stretched such as when the wind doesn’t blow.

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Centrica’s chief executive is worried that gas storage capacity may prove insufficient

Centrica’s chief executive Chris O’Shea told Sky News in July that a lack of gas storage in the UK risked power cuts in the event of an extended period of cold weather.

National Grid ESO is due to give more details, on Thursday, of how it will operate the Demand Flexibility Service (DFS) this winter – first introduced in 2022 in the wake of Europe’s gas squeeze caused by the war in Ukraine.

The scheme, which aims to prevent the possibility of blackouts by paying participants to turn off their main appliances at times of peak power demand, is being maintained as a back-up measure.

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