Centrica criticised over profits while raising prices

Centrica, which owns British Gas, says its operating profits for 2010 will be slightly higher than City analysts' expectations of £2.2bn.

Last week British Gas announced a forthcoming 7% rise in domestic gas and electricity charges, blaming rising costs.

Consumer Focus, a government watchdog, suggested the company was taking advantage of its customers.

But Centrica said wholesale gas and electricity prices were rising sharply.

"The wholesale cost of gas for 2011 is 25% higher than for 2010, and the wholesale price for electricity is 14% higher," said a Centrica spokesman.

"That is what is driving up bills."

Consumer Focus, the government's official consumer watchdog, said customers would be baffled as to why they were being asked to pay more when Centrica was on track to make huge profits.

"This begs the question, yet again, of why customers have seen only tiny price cuts when wholesale costs have been so low for so long, yet suppliers hike prices as soon as wholesale costs start to edge up," said Audrey Gallacher at Consumer Focus.

In July, Centrica, which has other substantial energy businesses apart from British Gas, said its half-year profits had been boosted by the then low level of wholesale gas prices.

It will remain impossible to tell whether bills are fair ”

Now, it says domestic prices need to rise again because wholesale prices for the delivery of gas and electricity next year have started to go up.

"Other costs, such as network charges and environmental obligations, are also rising," Centrica said in a statement to investors.

"This has necessitated an increase in our residential gas and electricity prices of 7%, which we announced on 12 November and which will take effect from 10 December," it added.

Consumer Focus accused Centrica of taking advantage of the opaque nature of both the wholesale and retail sides of the energy market.

"Unless there is a major injection of transparency into this increasingly complex sector, it will remain impossible to tell whether bills are fair and the market is working properly," the watchdog said.

"Customers are facing complicated and confusing tariff structures, with unclear headline discounts, penalties and rollover contracts leaving customers at a disadvantage."

The decision of British Gas had been preceded by a similar one from another of the big six energy suppliers - Scottish and Southern Energy (SSE).

The online price comparison service Moneysupermarket.com described the Centrica profits forecast as a "kick in the teeth" for customers.

"Its eight million customers now are now facing a £82 increase, taking bills to £1,239 on average a year."

"Forward wholesale gas and power prices are significantly higher for 2011 than they have been in the current year, so could this be a sign there are further price rises on the bleak horizon?"

EDF, another of the big six, has said however that there will be no tariff increases until at least March 2011.