SCOTTISH Gas owner Centrica said today that profits for the year are expected to be hit by the increasing cost of wholesale gas.
The company also hinted that it may be forced to pass on its cost pressures to consumers through another price rise in the current financial year.
Scottish Gas raised its gas and electricity prices to consumers by 15 per cent in January, but Cent
rica said costs have continued to go up since then.
On average the month-ahead cost of gas and electricity is 92 per cent and 100 per cent ahead of last year respectively.
"Following our retail price increase in January, the wholesale gas price continued to rise, which has caused profit margins in British Gas in the first half of the year to be squeezed to levels below our long run expectations," Centrica said in an interim management statement today.
"As expected, overall group operating profit for the first half of the year will be materially lower than the first half of 2007. This is due primarily to the lower profitability in British Gas Residential, which experienced exceptional conditions in the early part of last year.
"Looking to the full year, forward wholesale gas and power prices in the UK remain stubbornly high."
It said that the wholesale gas price for the second half of this year is double that experienced during the second half of 2007 and for the fourth quarter of this year it is over 80p per therm, compared to 44p for the same period last year.
In other parts of the business, Centrica said that customer service has continued to improve, with complaints about it to Energywatch falling by 78 per cent on the same period of 2007. Its call answering time also improved by over 60 per cent.
But sales of energy accounts slowed following the price rise, with the company ending 2007 with 15.9 million customers.
The firm said that its gas production business at Centrica Energy has been "particularly strong" in the year to date,
and added: "While the current outlook for gas prices does create a challenging environment for energy suppliers, we will take the necessary action to deliver reasonable margins in the retail business."
The full article contains 377 words and appears in Edinburgh Evening News newspaper.
