After oil and gas prices soared last year, British Gas owner Centrica reported enormous profits, prompting renewed demands for energy companies to pay more tax.
Profits for 2022 will reach £3,3 billion, more than tripling the £948 million earned in 2021.
After Russia invaded Ukraine, oil and gas prices skyrocketed, resulting in record energy sector profits.
British Gas was criticized for using debt collectors to forcibly install prepayment meters in the residences of vulnerable customers.
In the United Kingdom, energy companies have been subjected to intense pressure to pay more tax on their earnings. As many households battle with rising gas and electricity bills.
End Fuel Poverty Coalition stated that the energy market is “failing consumers and desperately needs change.”
Chris O’Shea, CEO of Centrica, stated that the business invested £75 million in customer support last year, giving “much-needed stability and support.
“Donations to assist clients”
The majority of Centrica’s record-breaking profits came from its nuclear and oil and gas businesses, not its British Gas energy supply company, which contributed £72 million to the £3.3 billion profit. The overall profit figure included the effect of the company’s May sale of its Spirit Energy oil and gas business.
According to Centrica, British Gas’s earnings were 39% lower than in 2021, primarily due to “voluntary contributions made to support customers” and the repayment of pandemic furlough funds.
The business reported paying approximately £1 billion in taxes on its 2022 profits.
About £54m was paid as a result of the Energy Profits Levy, a windfall tax introduced by the government last year to recoup a portion of firms’ “extraordinary” profits and help finance lower gas and electricity bills for households.
Although the government is presently limiting annual energy costs for a typical household to £2,500. This is still more than double what they were before the Ukraine war. In April, the barrier will also increase to £3,000.
In addition, Centrica announced that it would raise the amount of money returned to its shareholders. Launching a £300 million share buyback program and a 3p per share full-year dividend.
“Cashing it in”
The company’s enormous earnings have been criticized.
Sharon Graham, general secretary of Unite, stated that Centrica “profits from our massive energy bills. While dispatching bailiffs to prey on vulnerable consumers across the nation.”
Rachel Reeves, Labour’s Shadow Chancellor, urged the government to “impose a fair windfall tax on oil and gas giants to prevent an April increase in energy costs.
The government’s windfall tax only pertains to profits derived from oil and gas extraction in the United Kingdom. The current rate is 35%. But oil and gas firms pay an additional 30% corporate tax and 10% rate, bringing it to 75%.
However, businesses can lower their tax burden by deducting losses and expenditures such as North Sea oil platform decommissioning.
Despite record profits, BP and Shell have paid little or no UK tax.
Centrica consists of two distinct companies, one of which is producing record-breaking profits and the other which is not.
British Gas, its retail division, provided about 2% of the company’s £3.3 billion profit. The remainder came from its gas extraction and electricity generation businesses.
People will see a business awash in cash while employing debt collection agencies to force their way into struggling households to install prepayment meters, causing understandable anger.
What does Centrica do with its abundance of wealth, which prevents it from selling the energy it generates to its retail consumers at a lower price than to others due to competition laws?
It has already suspended the organization responsible for the forced installation of prepayment meters. In addition, the company forecasts that it will pay £2.5 billion in windfall taxes by 2028. But many will view this as insufficient.
The government, not companies like Centrica, Shell, and BP, is responsible for finding a solution to this issue.
The findings are a result of the Times newspaper’s revelation that debt agents employed by British Gas, the largest electricity and gas provider in the United Kingdom, had forced their way into the homes of vulnerable people to install prepayment meters. It has led to the exposure of numerous similar incidents.
The revelations prompted the energy regulator, Ofgem, to request that all suppliers halt forced prepayment meter installations. Courts in England and Wales stopped installation applications as well.
Centrica stated that it was “extremely disappointed” by the claims against one of its contractors, Avarto Financial Solutions and that it was “conducting a comprehensive independent investigation.”
More than four million homes in the United Kingdom are equipped with prepayment meters, which require customers to pay for energy in advance through accounts or by adding credit to a card. It is more costly than a direct debit payment.
However, stringent regulations are intended to prevent suppliers from moving at-risk customers onto prepayment meters, out of concern that individuals may “self-disconnect” if they cannot afford to top up their accounts.
In November of last year, Ricky, a British Gas user in Kingston upon Thames, had a prepayment meter installed against his will.
The 46-year-old is unable to work routinely due to his long Covid. He told that he was put on the vulnerable register by British Gas after receiving an £800 bill.
But one morning, he was awoken by individuals banging and shouting on his front door. At the entrance, he observed a locksmith kneeling and preparing to break in.
“I was totally confused,” he stated. Ricky said a woman from Arvato Financial Solutions handed him a letter requiring a smart prepayment metre.
Ricky described the entire experience as “distressing and humiliating,” adding that he “felt humiliated.”
British Gas stated that they were “extremely sorry” to hear about Ricky’s experience and that they would contact him to “evaluate how we can fix things.”
Avarto Financial Solutions has thus far declined to remark on the accusations.
