As it became clear that UK household energy costs could soar to £500 per month due to Russian threats to shut off Europe’s gas supplies, British Gas owner Centrica angered the public by stating profits had increased five-fold to £1.34 billion today.
When compared to the £262 million generated during the same period last year, the operating profit was staggering for the six months ending in June.
Energy producer Centrica, which sells energy to consumers and companies, declared it would resume its dividend at 1p per share after having it suspended for three years.
Consumers in need criticised the firm for its “obscene avarice,” and former Energy UK CEO Angela Knight said on TalkTV that people reaping extraordinary profits from an extraordinary global circumstance raise serious concerns.
Chris O’Shea, chief executive of Centrica, justified the company’s decision to reinstate the dividend, stating that the company’s consumer sector was not to blame for the increase in profits and that pensioners who depended on dividends for their livelihood needed to be supported.
The energy crisis is not the source of our profits, he added, adding that British Gas’s profits had dropped to £98 million, down 43% from a year ago before the energy crisis.
In the first half of the year, British Gas added more than 200,000 customers despite an energy crisis that is hurting several of its competitors, including bankrupt supplier Together Energy.
Energy bills for the typical home could reach £500 in January 2023, according to predictions, with an annual price maximum of £3,850.
After Vladimir Putin’s government cut back on supply to Europe through the Nord Stream 1 pipeline, which Germany denounced as a “duplicitous game,” wholesale gas prices rose yesterday.
Gas prices increased across Europe as a result of the action, and several nations developed backup plans to reduce gas and electricity use by 15% in order to preserve supplies and safeguard households over the winter.
These include turning off the lights at intersections, not heating public pools, and stopping output at some large factories, although more drastic steps might be required.
However, this is driving up prices and won’t be enough to cover the gap left by Russia. Germany and other European countries are rushing to buy consignments of liquefied natural gas (LNG) via container from the United States, Africa, and the Middle East.
Since about 40% of UK power stations utilise gas as fuel, any increase in gas’ wholesale price is passed on to electricity.
Separately, there are worries about whether the UK will be able to produce enough electricity to keep the lights on this winter, with the difference between the maximum supply and the maximum demand being described as “tight.”
The Electricity System Operator has warned that the first half of December may be particularly challenging.
The existing restriction on energy prices is set to increase in October and again in January from just under £2,000 per year, depending on typical use.
Initial projections indicated that it would amount to about £3,400 in the coming year.
The increased increase in wholesale pricing, according to estimates by energy sector experts at consultants BFY, may cause the price to reach the equivalent of £3,420 in October and £3,850 in January.
Since consumers use more energy in January because they keep their lights and heaters on longer, the bill for that month alone may be above £500.
On Wednesday morning, wholesale gas prices increased to all-time highs of 530p per therm for the upcoming winter.
Moscow has attributed the Nord Stream decision to maintenance problems, but many believe that Moscow is intentionally reducing gas supply to Europe in retribution for western sanctions by “weaponizing” gas.
There are worries that Russia would completely stop providing supplies.
Senior consultant at BFY Gemma Berwick issued a warning that “any further decreases in flows will necessitate further price increase.”
Although just 4% of Britain’s gas has historically come from Russia, the country is connected to the continent by pipelines and depends on LNG cargoes, therefore UK gas prices are closely tied to those of the continent.
Earlier this week, members of the business select committee sought immediate action to enhance the assistance provided to the millions of people who will be hit hard by energy costs this winter.
The MPs argued that the Government’s announcement of household assistance, which ranges from £400 to £1,200, failed to account for the increases this winter.
The energy problem is once more moving faster than the government, according to committee chairman Darren Jones.
Before October, when the squeeze will turn into a full-on throttling of household finances and further drive the economy into recession, the support package must be refreshed and put into place in order to prevent millions from falling into insurmountable debt.