Business

British Gas owner Centrica in energy price rise warning

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Media captionAn unusually long and cold winter helped boost profits for energy suppliers

British Gas owner Centrica has warned that UK domestic energy bills could go up again this winter, as it reported a rise in half year profits.

Finance director Nick Luff said the "upward pressure on costs" continued.

"We will keep prices as low as we can for as long as we can", he said. "If prices do have to go up, we will delay it for as long as possible."

The warning came as British Gas' residential arm saw profits rise 3% to £356m, up from £345m a year earlier.

Centrica's adjusted operating profit rose 9% to £1.58bn for the six months to 30 June, up from £1.45bn for the same period in 2012.

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Media captionEnergy Minister Michael Fallon: "Companies should show restraint - there have been big increases in bills"

The company attracted criticism after raising energy prices for UK households by 6% in November 2012.

This pushed its average dual fuel bill up from £1,260 to £1,340 a year, according to energy comparison site Uswitch.

Speaking to the BBC, energy minister Michael Fallon called on the big energy companies to show "some restraint" in their consumer pricing after "big increases in bills over the last couple of winters".

Caroline Flint MP, shadow energy and climate change secretary said: "The time has come for a complete overhaul of our energy market.

"Labour has set out plans to break the dominance of the energy giants, open up the energy market, protect vulnerable customers from being ripped off and create a tough new energy regulator with the power to force energy companies to pass on savings to consumers."

Green energy

Centrica said the cost of complying with the government-imposed Energy Companies Obligation (ECO), aimed at helping low-income households with their heating bills and reducing carbon emissions through insulation, would be £1.4bn by the time the scheme ends in 2015.

It said these costs, coupled with rising transmission costs and volatile wholesale prices, had dented British Gas Residential's operating profits, despite gas consumption rising 13% compared with the same period last year.

But it still expects British Gas Residential's full-year operating profits to be "broadly in line" with 2012's figure of £606m.

British Gas has introduced a Tariff Checker to help its customers work out if they are on the cheapest tariff, but rising profits are still likely to attract criticism from consumer groups if household bills continue to rise.

For example, Tom Lyon, energy expert at Uswitch.com, said: "We would urge suppliers to reduce the pressure on consumers by guaranteeing that they won't hike prices this winter.

"Last winter, almost seven in ten households (69%) went without heating at some point to keep their energy costs down."

And Mike O'Connor, chief executive of Consumer Futures, said: "Wholesale gas prices have not risen significantly and their gas production and much of their generation business has done well.

"Those factors should give British Gas confidence to hold its prices."

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Media captionDominic Laurie explains how British Gas spends its income

Shale gas

On Tuesday, Centrica announced that it had bought the energy marketing business of Hess Corporation in a $1bn (£657m) deal that makes its Direct Energy subsidiary the largest business-to-business gas supplier in the eastern United States.

In June, Centrica also spent £44m on a 25% stake in a shale gas exploration licence in Bowland, Lancashire, owned by Cuadrilla Resources and AJ Lucas.

The company has agreed to contribute a further £56m towards future exploration and appraisal costs associated with the project.

But shale gas is proving to be a controversial topic in the UK, with public protests over its potential to cause pollution and environmental damage.

Speaking to BBC Radio 4's Today programme, energy expert Cornelia Meyer, who also sits on the board of Shale Energy plc, said: "Shale producers will have to do a lot of work in educating the public, but in the end we need shale gas....to be energy secure."

Centrica's results come a day after French energy company EDF reported UK pre-tax profits of £903m and said it was pulling out of the US nuclear power market because of the widespread availability of shale gas in the country.

The shale gas glut has caused gas prices to collapse in the US, whereas costs in Europe have been rising, largely thanks to the move towards lower-carbon energy sources.

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