(Bloomberg) -- Centrica Plc hit U.K. households with a double-digit rise in electricity prices after reporting lower earnings, defying a government pledge to lower costs.
Britain's largest power and gas supplier will raise prices by 12.5 percent from Sept. 15, after earnings fell 11 percent in the first half of the year. Gas prices will stay the same.
The move will mark the first increase in prices in almost four years as Centrica's British Gas unit was the only one of the “big six” U.K. household energy suppliers to hold prices steady in the past year. Chief Executive Officer Iain Conn is seeking to stem a customer exodus as he tries to limit the impact of new regulations on profit margins. U.K. Prime Minister Theresa May's government is preparing to intervene to ensure consumers aren't overcharged.
“Over the last year, we've been selling electricity at a loss,” Conn told reporters on a call. “Even after this increase, we'll be materially cheaper than the average of the large suppliers.”
The price increase will affect 3.1 million customers on its standard tariff, and 5.3 million consumers won't be affected, Centrica said.
The U.K. government should be “more open” about what's causing higher energy costs, including policy changes to spur a switch away from fossil fuels and needed grid investments, Conn said.
“It's a bit frustrating to end up always being blamed for it, but we have a good relationship with the government,” he said.
The policy and transmission cost increases more than made up for lower wholesale energy costs, Centrica said. U.K. summer 2018 power prices have declined 0.6 percent so far this year.
Government policy costs make up a “relatively small” proportion of household energy bills, said a spokeswoman for the Department for Business, Energy & Industrial Strategy in London.
The department is concerned Centrica's price increase will hurt many people already on poor-value tariffs, she said. It's written to regulator Ofgem asking what action it intends to take to safeguard the most vulnerable customers.
On Monday, an incomplete statement highlighting Centrica's power-price increase briefly appeared on British Gas's website. The statement was promptly removed.
Centrica's shares rose as much as 3.9 percent to 206.2 pence before trading at 201.1 pence at 12:50 p.m. in London. The stock has fallen 14 percent this year, compared with an increase of 5.2 percent in the Stoxx 600 Utilities index.
Centrica recorded a 224 million pound impairment due to the decision to close Rough, its gas storage site that's deteriorating due to age. In the first half of 2016 it took a 176 million pound impairment on the undersea asset.
To read more about how Rough's closure affects Centrica, click here
- Centrica's adjusted earnings fell 11 percent to 449 million pounds
- Group revenue rose 7 percent to 14.3 billion pounds
- U.K. energy supply customer account numbers fell 3 percent to 13.9 million
- Exploration and production volumes dropped 7 percent
- Adjusted operating costs fell 5 percent to 1.27 billion pounds
--With assistance from Kelly Gilblom
To contact the reporters on this story: Mathew Carr in London at m.carr@bloomberg.net, Jessica Shankleman in London at jshankleman@bloomberg.net.
To contact the editors responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net, Anna Shiryaevskaya, Rob Verdonck
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