Yahoo Finance British Gas owner Centrica warns government price cap will hit results
British Gas warned about a price cap. Photo: Owen Humphreys/PA Archive/PA Images
British Gas owner Centrica (CNA.L) has warned the UK government’s cap on energy prices will hit its results in 2019.
The warning from Britain’s biggest energy supplier comes despite plans for a 10% price hike on its standard variable tariff from 1 April, which will affect around four million customers.
Shares in the firm, which owns British Gas, dropped more than 11% in early trading this morning.
The firm reported a 12% rise in operating profit last year as it announced its results today, but sounded the alarm over a new government price cap aimed at helping consumers.
READ MORE: Watchdog says cap could save customers £1 billion a year
Ian Conn, group chief executive, said in a statement: “Centrica’s financial performance in 2018 was mixed against a challenging external backdrop.
“Our 2019 financial performance will be impacted by the UK default tariff cap and continuing lower volumes in exploration and product and nuclear, meaning our 2018-20 target range for average adjusted operating cash flow is under some pressure.”
He said the firm was working hard to improve efficiency and secure “financial discipline” in the year ahead, with £250m in savings planned across the group.
The firm will also sell £500m of its “non-core” operations in 2019.
British Gas followed other energy firms last week in announcing it would hike tariffs from April, after regulator Ofgem raised the level of its cap on price increases.
The move will see customers on its standard variable tariff face a rise in average bills to £1,254 a year. Prepayment customers will see prices rise by an average of 9%.
Ofgem introduced the price cap amid widespread criticism of the energy industry over rising bills in recent years, with prime minister Theresa May calling them a “rip-off.”
The cap is calculated to reflect suppliers’ costs, but firms believe it is set too low and Centrica is seeking a judicial review of the way it is calculated.
