Centrica has reported adjusted operating profits of £2.4 billion, up 1 percent on 2010’s levels. Centrica’s annual results also reveal that British Gas’s profits fell by 30 percent, following an unexpectedly mild winter.

Despite the drop in profits for British Gas, it is estimated that the UK’s largest gas supplier made £50 profit from each household it supplies. Centrica’s Chief Executive, Sam Laidlaw, defended the company’s profit levels despite fierce criticism over the spiralling cost of energy bills, stating: “We need to raise public awareness as to what is on the bill and why utility bills go up, and that is driven by global wholesale prices.”  

British Gas claim that more than 80 percent of the costs that make up a UK customer's bill – both gas and electricity – are outside Centrica’s immediate control. This includes the cost of wholesale energy plus regulated transportation costs and Government obligations and taxes.

Centrica blame regulatory environmental initiatives, such as the feed-in tariff, for rising bills. British Gas claim that Governmental obligations and taxes added £77 on the average dual fuel bill in 2011 and, under current policies, the cost is likely to “increase substantially, doubling over the next three years.”  

To illustrate the breakdown of a British Customers electricity bill, Centrica published the following infographic:

Centrica also admits that wholesale gas prices will continue to rise in 2012, placing further pressure on consumers’ bills. The average gas price for next winter will be 15 percent higher than this winter with non-commodity costs expected to increase by 18 percent.

Centrica installed almost 13MW of solar PV capacity for both residential and commercial customers, totalling 2,400 installs in 2011. Following the announcement of a steep drop in the solar feed-in-tariff rate, Centrica expect demand to reduce. However, the energy giant thinks that falling panel prices may help ensure that solar continues to be an attractive investment for residential, business and public sector customers.

As part of the Group wide programme to sharpen the business and reduce costs, Centrica is targeting substantial cost reductions within British Gas, with absolute underlying operating costs expected to reduce by 10 percent over the next two years. To achieve this, Centrica has already announced some 1,800 role reductions across its business. The knock-on effect of this decision is the scrapping of all field sales activities and the scaling down of its solar business.

Caroline Flint, Shadow Secretary of State for Energy and Climate Change blasted the continued profits of the ‘Big Six’ under the coalition’s watch, stating: “By letting the energy giants get away with this, the Government is showing it's out of touch and completely unable to stand up to powerful vested interests in the energy industry. Our energy market needs a complete overhaul, but David Cameron can only fiddle at the margins because he’s too close to vested interests to stand up for working people.”

Centrica’s annual profit announcement follows EDF’s announcement that it trebled its profits in 2011. The rest of the ‘Big Six’ suppliers are expected to announce their respective profits over the coming weeks.