BRITAIN’S gas utilities are suffering losses of close to £1 billion a year because they have been unable to pass on the soaring cost of wholesale gas to consumers, according to a leading gas industry consultant.
The total loss suffered by the top five gas suppliers last year — E.ON Powergen, Innogy, EdF, ScottishPower and Scottish and Southern but not British Gas — is estimated to be between £500 million and £800 million, reckons Niall Trimble of the Energy Contract Company.
Unless the gas companies can substantially and quickly raise the price to domestic consumers, the losses will continue and worsen, said Mr Trimble. “They are losing their shirts. We have tracked the profitability of the domestic market over six years and they have lost money in every year apart from one in which they might have broken even,” he said.
The profitability of British Gas, the domestic supply arm owned by Centrica, is more difficult to estimate because of its ownership of the giant Morecambe Bay gasfield. But Centrica recently said that British Gas was in the red in the second half of last year and analysts expect Centrica’s overall earnings to halve if the unit fails to raise domestic gas prices by at least 30 per cent. Martin Brough of Dresdner Kleinwort Wasserstein said that the margin on the domestic supply business will fall from 1 per cent to nil if it fails to raise prices by more than 10 per cent.
Evidence of the losses of Britain’s gas utilities emerges as the Government today launches its Energy Review, a consultation into energy which is expected to rescind previous support for growth in the use of natural gas for power generation. The review is likely to focus on a revival of nuclear power and clean coal technology.