Scottish Gas owner to give £500m to shareholders after record profits

Campaigners are continuing to raise concerns about energy companies profiteering in the wake of the latest announcement of record profits and there have been calls for a tax on share buybacks.

Companies reward their shareholders by paying out a portion of their profits. Though cash dividends are the most common form of shareholder remuneration, another method is share buybacks.

The energy regulator earlier this month launched a probe following use of debt collectors by Centrica firm British Gas to enforce court warrants over the installation of payment meters.

Ofgem launched the probe after concerns were raised that elderly and disabled people were being forced onto the meters and then routinely cut off from heat and power as they could not afford to top up.

The revelations resulted in Ofgem, the energy regulator, asking all suppliers to suspend forced pre-payment meter installations, telling firms to get their "house in order".

Ofgem said on Wednesday that a forced installation of energy prepayment meters only extends until the end of March.

Energy supplier Centrica's full-year profits hit £3.3bn for 2022, more than triple the £948m it made the year before.

Centrica’s profits have further enraged campaigners who are calling for tougher windfall taxes, lower bills and better treatment of vulnerable customers against the backdrop of the prepayment meter scandal.

Most of Centrica's bumper profits came from its nuclear and oil and gas business, rather than from the energy supply business through British Gas and Scottish Gas, which contributed £72m out of the £3.3bn profit.

Energy firms have seen record earnings since oil and gas prices jumped following Russia's invasion of Ukraine.

There has been past controversy over record profits posted by energy firms BP and Shell while many struggle to make ends meet in the cost of living crisis.

The new wave of energy giant profits have led to more calls for better support for struggling consumers and for firms to pay more tax as many households struggle with rising bills.

Energy prices rose sharply in March last year after Russia invaded Ukraine, sparking concerns about global supplies.

Energy prices rose sharply in March last year after Russia invaded Ukraine, sparking concerns about global supplies. Supplies have been limited since the invasion and the subsequent sanctions imposed on the country.

The price of Brent crude oil reached nearly $128 a barrel, but has since fallen back. Gas prices also rose but have come down from their highs.

George Dibb, head of the Centre for Economic Justice at the think tank, IPPR, said Centrica’s profits were “scandalous” and called for a tax on share buybacks.

“We all know that wholesale energy prices have been sky-high for the past year, but that’s no reason that gas suppliers should be making higher profits on the back of higher bills,” Mr Dibb said. “These profits, which are then being transferred directly to shareholders via buybacks and dividends, are a direct transfer away from bill-payers during a cost of living crisis."

Shadow chancellor Rachel Reeves said: "The Government must bring in a proper windfall tax on oil and gas giants to stop energy prices rising in April.”

Liberal Democrat leader Sir Ed Davey said: “This is a betrayal for British Gas customers across the country who are struggling to keep their heating on."

Unite general secretary Sharon Graham said Centrica had been "coining it in from our massive energy bills while sending bailiffs to prey on vulnerable consumers the length and breadth of the country".

TUC general secretary Paul Nowak said it was time to bring energy retail companies into public ownership saying the market was "broken".

Simon Francis, coordinator of the End Fuel Poverty Coalition, added the energy market was "failing consumers and is in desperate need of reform".

Disability equality charity Scope said disabled people are facing devastating situations because they can't afford enough energy.

"It's obscene that energy companies continue to make massive profits," Tom Marsland, the policy manager at the charity, said.

Rishi Sunak introduced a windfall tax when he was chancellor, describing it as a 25% Energy Profits Levy.

The levy applies to profits made from extracting UK oil and gas, but not from other activities such as refining oil and selling petrol and diesel on forecourts. Mr Hunt said it would raise £40bn over six years.

Oil and gas firms also pay 30% corporation tax on their profits as well as a supplementary 10% rate. Along with the new windfall tax, that takes their total tax rate to 75%.

In the Autumn Statement, Chancellor Jeremy Hunt announced this would increase to 35% from January 2023, and stay in place until March 2028. It had previously been scheduled to finish at the end of 2025.

Centrica said it paid about £1bn in tax relating to its 2022 profits, some of which was as a result of the windfall tax - called the Energy Profits Levy - which was introduced by the government last year to recoup some of the "extraordinary" earnings made by firms and help fund lower gas and electricity bills for households.

Centrica chief executive Chris O’Shea insisted the company had invested more in helping its customers with rising energy bills than the £8 profit per customer it made after tax in its British Gas Energy division, which supplies households with electricity and gas.

Mr O’Shea said: “Whilst customers may see some relief given recent easing of prices, it remains clear that some will continue to need help and we will do what we can to support them in the year ahead.”