Expert comment: British Gas recoups its losses

“The massive surge in British Gas’s profits has made headlines, partly because the announcement came at a time when major energy companies reported a notable decline in their earnings (for instance, Shell’s second quarter results were 56% lower than those reported in the second quarter of 2022), but most importantly because this has happened at a time when consumers are still struggling with their hefty energy bills.

“It is worth noting that not all energy companies are in the same type of business and are, therefore, exposed to different dynamics. British Gas is the retail arm of Centrica. The surge in profit in the energy retail business, which is highly regulated, is largely due to the change in the price cap that Ofgem introduced last year in an attempt to support struggling retail business, especially following back-to-back challenging years between 2019 and 2022. This saw some suppliers going bust as they faced high wholesale prices. The higher cap has allowed a company like British Gas to recoup some of the losses made in those years.”