Retail energy costs still rising says Centrica

Higher gas and power prices have been offsetting lower usage levels this year at Centrica, leaving the gas and electricity provider trading in line with expectations.

UK wholesale gas costs are around 15% higher for next winter than last, and non-commodity costs are expected to add a further £50 to the cost of supplying the average household this year, the group revealed, as it explained why the trend for retail energy costs remains upwards.

The group said that the number of residential energy accounts it has is little changed from the beginning of the year after its British Gas brand took action to cut its standard electricity tariff by 5% in January.

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Average domestic gas consumption for the four months to April was 1% higher than for the same period in 2011, with average domestic electricity consumption 3% lower. These movements reflect colder than usual weather in April 2012 following mild conditions in the first quarter, and the impact of energy efficiency measures being undertaken by customers.

In business energy supply, average consumption was lower in the first four months than in 2011 for both gas and electricity, at 1% and 4% respectively, and margins continue to come under pressure in the current economic environment.

In residential services - boiler maintenance and the like - the group remains on track to deliver double digit percentage profit growth, primarily through cost control. The number of contract holdings increased by 37,000 in the four months to the end of April.

In the upstream gas and oil business the group says it expects to complete the purchase of North Sea assets from French firm Total over the coming months, although following notification of pre-emption on around 40% of the assets and some 15% of near-term production, the transaction is now expected to be for 14m barrels of oil equivalent (boe) of reserves and a consideration of $224m (£139 m).

In North America Centrica expects to deliver further year-on-year profit growth in 2012. In residential energy supply, profitability in the current year is expected to be slightly reduced compared to 2011, with the impact of regulatory changes in Canada and warmer than normal weather in the year to date offsetting good customer growth in the US North East. However, in business energy supply the group is continuing to deliver growth, with power volumes 9% higher in the first four months of 2012 than for the same period in 2011.

"We remain on track to deliver our £500m cost reduction programme, with half of the efficiencies expected to be delivered in 2012. This will ensure that we remain competitive both downstream and upstream, while also enabling investment in growth areas," the group said.

JH