Centrica defends record-high profits of £3.3bn

Centrica insisted that Britain’s cost of living crisis could not be solved by one company alone as it sought to defend a more than threefold rise in operating profits to a record £3.3bn for 2022.

The forecast-beating results prompted Centrica to announce that it would extend a £250mn share buyback programme launched in November — its first since 2014 — by a further £300mn this year.

Centrica’s profits were driven by its North Sea gas production, nuclear power and energy trading divisions, which benefited from the extreme volatility in wholesale markets last year triggered by Russia’s full-scale invasion of Ukraine.

But the owner of British Gas, which was recently embroiled in a scandal involving the forced installation of prepayment meters in vulnerable customers’ homes, came under fire from fuel poverty campaigners after releasing its results on Thursday.

Simon Francis, co-ordinator of the End Fuel Poverty Coalition, a group of charities, local authorities and trade unions, said Centrica’s profits were built “on the backs of older people, young families and the disabled suffering in cold damp homes this winter”.

George Dibb, head of the Centre for Economic Justice at the think-tank IPPR, said Centrica’s profits were “scandalous” and called for a tax on share buybacks.

The criticism came despite operating profit at the British Gas retail division falling 39 per cent to £72mn in 2022 as the company made “voluntary donations” to help struggling customers. British Gas supplies electricity and gas to more than 7.5mn British homes.

Chris O’Shea, Centrica’s chief executive since 2020, said there needed to be a wider debate involving the government and regulators on how to tackle the cost of living crisis in Britain, which he pointed out went beyond households’ ability to pay their energy bills.

Centrica is carrying out an internal investigation after a Times newspaper investigation alleged that a contractor working on behalf of British Gas had broken into vulnerable people’s homes to fit prepayment meters.

“Where we have got it wrong, we will fix it,” O’Shea said. “What I have to be clear on is this is not something that can be solved by British Gas, it’s not something that can be solved by Centrica, it’s something that really requires industry, government and regulators to work together and hopefully it will go beyond just the energy industry.”

All energy suppliers have been ordered by regulator Ofgem to halt the installation of prepayment meters using court warrants until the end of the winter. When asked if the practice should end permanently, O’Shea described the situation as “tricky” and pointed out it was illegal in other industries for companies to advance credit to customers when they know they cannot afford to pay it back.

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Centrica said it had invested more in helping its customers with soaring energy bills than the £8 profit per customer it made after tax in its British Gas energy division.

It also highlighted that it paid roughly £1bn in tax for 2022 compared with £433mn the year before after the UK government last year introduced a windfall tax on oil and gas producers. A similar levy on electricity generators came into force at the start of this year. Centrica estimates it will pay about £2.5bn in UK windfall taxes until 2028.

Mel Evans, head of UK climate at Greenpeace, highlighted that a large proportion of Centrica’s windfall came from its trading division, which recorded a 20-fold increase in operating profit to £1.4bn.

“The windfall tax doesn’t cover this, nor the profits from gas-fired power stations,” Evans said. “The government should expand the windfall tax immediately and use the money to fund home insulation, energy bill support and green heat.”

O’Shea refused to comment on whether he would forfeit his annual bonus for 2022, as he did last year.

Chris Hayes, senior analyst at the left-of-centre Common Wealth think-tank, said a bonus for the chief executive “would not be justified at all on moral, social or economic grounds — especially since [Centrica’s profits] windfall owes to circumstances beyond their control”.