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British Gas: £25m poor handout versus profits of £20 billion since 1997

·2-min read
Photo of a gas hob with a bill from British Gas (Owen Humphreys/PA) (PA Wire)
Photo of a gas hob with a bill from British Gas (Owen Humphreys/PA) (PA Wire)

Yesterday British Gas, an unlikely white knight, said it will donate 10% of its profits each six months to help poorer customers struggling with higher bills.

Well, we’re all poorer and it smacks slightly of a PR stunt, but in the absence of anything approaching coherent government policy, is welcomed nonetheless.

If nothing else, it puts pressure on the rest to follow suit.

The customer support package is worth about £25 million at the moment, one of those figures that is both quite a lot and pitifully inadequate at the same time.

How does that £25 million compare to British Gas’s profits over the years?

It is harder to work out than it might be. British Gas was privatised in 1986 but then split three ways in 1997 into Centrica (the parent of British Gas), exploration arm BG (bought by Shell in 2016) and Transco which merged with National Grid about 20 years ago.

Figures from Refinitiv show that between 1997 and 2021, Centrica had total sales of £465 billion on which it made profits of nearly £20 billion. It paid dividends to investors, many of them small retail shareholders, of more than £11 billion.

So the debate here is how much we think these energy giants should make in profit and how much of that they should dish out to investors.

At this stage, even that full £11 billion wouldn’t get us all out of power jail. Keith Anderson at Scottish Power this week said it would cost £100 billion over two years to protect us from rising bills.

The point of having large stock market listed energy entities was to free them from government interference and introduce competition.

In normal, or good times, it sort of works.

When it comes to a crisis like this one, the limits of the policy are plain. There is nearly nothing the smartest consumer can do to protect herself from what is coming.

So what we have is an energy market that works reasonably well, as long as nothing bad is happening, at which point it requires government intervention. It’s not what Mrs Thatcher hoped for when she told Sid to buy British Gas shares all those years ago.