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British Gas could cut prices further


British Gas have suggested that household gas prices could be cut even further, after recently announcing that their current prices will be reduced by 5% at the end of the month.

Wholesale gas prices have plummeted in recent months, and Centrica, the company that owns British Gas, has said that they expect these prices to stay low for the foreseeable future.

Iain Conn, the newly appointed chief executive at Centrica claimed that “lower wholesale prices will persist for all of 2015 and potentially through 2016 and into 2017”.

He continued to say: "If prices do stay low then, as we are buying ahead, the average price we have been buying ahead will also fall and if it stays low there is the possibility of further reductions we could pass through to our customers."

The energy industry has been criticised in recent weeks, as they have been accused of increasing prices when wholesale gas prices go up, but not bringing them back down when these costs fall.

However, British Gas has defended themselves against these accusations by insisting that savings can take a while to filter through to the customer. This is because they purchase wholesale gas well in advance, meaning that they do not benefit from the lower cost of oil and gas straight away.

Profits slump

As oil and gas prices have plummeted in recent months, the oil production arm of the company has suffered and overall profits slumped.

Overall profits fell by 35% in 2014, and therefore stood at £1.75bn. Additionally, their household gas and electricity supply business fell by a total of 23% to £439m in the same time period, as customers used considerably less gas in one of the warmest years on record.

Speaking about this slump in profits, Mr Conn said that “2014 was a very difficult year for Centrica and the recent fall in oil and gas prices creates further challenge. We are cutting investment and costs in response."

Additionally, the company lost a significant number of customers to rivals, as publicity intensified about the benefits of switching supplier. Overall, their number of gas and electricity accounts fell by 368,000 in 2014.

As a result of these poor figures, the company has decided to cut the value of the dividends it is paying to shareholders, write down £1.4bn in the value of its North Sea power plan assets, and are reducing North Sea investment by around 40%.

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