UK Markets open in 3 hrs 31 mins

Consumer Groups Question British Gas Profit

(c) Sky News 2012

Centrica (LSE: CNA.L - news) has confirmed that profits at its British Gas Residential arm rose 23% to £345m in the six months to June 30.

British Gas Residential, which has 15.8 million energy accounts in the UK, said the strong results were boosted by the cool start to the summer.

But the UK's biggest energy supplier also benefited from higher prices - it dropped its standard electricity prices by 5% in January, but this did not cancel out a 16% rise in August when gas bills also went up by 18%.

The rise in profits means that British Gas Residential made some £1.9m of profit a day.

Meanwhile, consumers have struggled to cope after the average dual fuel bill rose to £1,310 a year - more than £200 higher than two years ago.

Consumer Focus has accused utility companies of being quick to pass on rising wholesale costs to consumers, but slow to drop prices when they fall.

Richard Hall, head of energy regulation at Consumer Focus, said: "Wholesale prices rose a little earlier in the year but are now falling and they are still a long way from their peak in 2008.

"We have long questioned whether drops in wholesale costs find their way through to household bills."

Ann Robinson, director of consumer policy at uSwitch, told Sky News: "British Gas customers have every right to expect a significant reduction in prices so that they can look at this winter in a slightly more relaxed frame of mind."

She (SNP: ^SHEY - news) added: "Quite frankly, a 23% increase is huge. We know that last winter, the majority of us struggled to pay our bills, I think that this winter there is going to be severe rationing as well.

"I think it's time for British Gas to cut their customers a better deal."

Profits at Centrica's residential arm were also higher because of weak figures a year ago when it delayed passing on price rises to customers, meaning it was supplying at a loss.

The stronger performance at British Gas helped the group's underlying earnings rise 14% to £767m - slightly better than City expectations.

Its (Euronext: ALITS.NX - news) upstream gas and oil production business saw profits rise 28% to £682m, buoyed by £1.2bn of acquisitions.

Chief executive Sam Laidlaw said: "Centrica has performed well in the first half of 2012 despite challenging market conditions, although the increase in earnings must be placed in the context of unusually low levels of consumption and profits in the UK in the first half of 2011."

On Wednesday, the group announced a £1.4bn investment with GDF Suez (Euronext: GSZ.NX - news) to develop a major North Sea gas field off the coast of Norfolk, creating some 4,000 jobs.

It is believed to be the largest gas discovery in the southern North Sea for 25 years.

Meanwhile, energy giant Royal Dutch Shell said that second-quarter net profits tumbled 53% to £2.5bn on the back of sliding world oil prices.