British Gas profits up 600%

British Gas was today accused of "fleecing" cash-strapped families after unveiling a multi-million pound rise in profits for its residential services division.

Energy regulator Ofgem today launched an investigation into the electricity and gas markets for households and small businesses.

British Gas announced a £476 million increase in profits for the past year, just weeks after hitting 13 million customers with double-digit energy bill rises. Profits were up 600 per cent from £95 million in 2006

Consumer groups and unions reacted angrily to the announcement, branding the figures "a scandal". But British Gas insisted a large proportion of the earnings had been achieved by in-house cost savings, and the cutting of 2,000 jobs.

The British Gas residential profits of £571 million contributed to a 40 per cent leap in earnings at parent company Centrica, which stood at £1.95 billion last year.

Bosses said the record profits haul followed a "year of two halves" for its residential business, with the second six months falling far short of the first, due to soaring wholesale costs.

The firm defended it decision to increase British Gas bills by an average of 15 per cent last month, saying the division would be loss-making by now if it had not made the move.

But Adam Scorer, energywatch director of campaigns, said: "No-one is going to argue that energy companies don't need to make a profit. However, British Gas customers will want to tear their hair out when they hear the scale of these profits and compare them with their own rising bills.

"It is perfectly true that there is volatility in wholesale energy markets. But it seems equally true that such volatility hits consumers not shareholders. Consumers will feel justified in claiming that they are being taken for a very rough ride by energy companies."

The GMB union's national officer Gary Smith said: "At the same time that British Gas is fleecing its customers and making record profits, it has the temerity to propose to cut the pension benefits of its staff. This is greed gone mad which we will oppose. It is about time a full inquiry was conducted.

"The average person in the street does not understand how it is that companies like Centrica can announce record profits while they are faced with crippling bills."

He was backed by Steve Bloomfield of public services union Unison, who said: "It is a scandal that a growing number of people are suffering from genuine fuel poverty, including families, the elderly and disabled people, when energy companies are making record profits."