Competition in the energy markets has resulted in UK energy and home services provider British Gas freezing its residential energy prices in 2014, parent company Centrica stated in its interim management statement released on Thursday.
According to Centrica, a British multinational utility company, the average British Gas residential energy bill was approximately 10% lower this winter compared to the same period a year ago, due to lower consumption because of mild weather. UK market prices for gas and electricity have fallen since the start of the year and political tensions in the Ukraine are said to have focused attention on security of supply and the potential impact on European energy prices. Despite these challenging market conditions, an unprecedented focus on the energy sector, a highly competitive environment for energy supply and assuming that energy market conditions remain benign, the company does not expect to change its residential energy prices during 2014.
Centrica said it expects full year residential energy supply revenue to be approximately 10% lower than levels in 2013. The post-tax margin is expected to be about 4%, lower than 2012 and less than its consistent expectation of long-term post-tax margins in the range 4.5%-5%, which the company believes is necessary to underpin investment in the business.
With additional costs associated with the exceptionally cold weather in the US, offset by a lower depreciation charge on the company’s UK gas-fired power generation fleet, Centrica added that it expects 2014 full year adjusted earnings per share for the Group to be in the range GBP0.22 to GBP0.23 per share.
Sam Laidlaw, Chief Executive of Centrica, said:
“Customer relationships are core to the long term health of Centrica. The investment we are making in smart connected homes and innovation is helping customers reduce and control their energy consumption, which is the most sustainable way to keep bills down. The combination of mild weather and our expectation that we will not change energy prices this year, means the average British Gas household energy bill is expected to be lower in 2014 than in 2013.
“Investment in security of supply remains a key priority. We continue to invest in new sources of gas for the UK and we have commitments totalling around GBP60bn to help secure energy for our customers. We have further strengthened our relationship with Qatar Petroleum International through today’s transaction, and look forward to continuing to work with them as we consider investment opportunities in gas and power on both sides of the Atlantic. We are also refocusing our UK power generation investment towards more flexible plant, with a view to bidding into the capacity market.
“The decisions and actions that management is taking across the Group will leave the business well-placed for the long term. While earnings are anticipated to fall in 2014, we expect an improvement in 2015, assuming more normal weather conditions and reflecting the prospects for underlying growth in Direct Energy, UK gas storage, British Gas Services and British Gas Business.”