British Gas owner Centrica has warned that the Conservative party’s plans to cap energy bills could push up average prices, as the company haemorrhaged customers at a rate that would see it lose a million by the end of the year.

Although Centrica was the only one of the big six energy suppliers not to put up its tariffs this winter, Britain’s biggest energy firm still lost 261,000 customers to competitors in the first quarter of 2017.

The fall comes on top of the 400,000 customers British Gas lost last year, taking it below 14 million UK residential customers for the first time since the 1970s.

Mark Todd, co-founder of switching site Energyhelpline, said the supplier was shedding customers because its prices were not competitive.

“British Gas have kept their standard prices much lower than the rest of the big six but even so this has still seen them lose quarter of a million customers in the first three months of trading – ultimately because there are much cheaper tariffs available for switchers.”

He predicted that in June the company would announce a 5-10% increase in its standard variable tariff that would affect millions in August.



In a trading update before its AGM later on Monday, Centrica said the homes it supplies in the US and UK had used less energy than normal because of above average temperatures this year.

The company, which has a sizeable power generation arm, said it had taken a financial hit from wholesale prices falling since its preliminary results in February. Its North Sea gas storage plant has also been closed temporarily over safety concerns.

However, Centrica still earned the highest profit margins in the sector on its customers last year, at 8.8% of earnings before interest and tax, versus an industry average of 5.6%, according to new analysis.

Lazarus Research found gross profit margins across the sector were the highest on record, which it said would “provide ammunition to the government on why a cap is needed”.

British Gas’s parent company reiterated its call for the next government to resist imposing price caps on the standard variable tariffs that two-thirds of people are on. The Tories have promised their cap will save the average family £100 a year. Labour is expected to announce a similar policy.

“Centrica does not believe in any form of price regulation. Evidence from other countries would suggest this will lead to reduced competition and choice, and potentially higher average prices,” the company said.

The £4.15m pay package for Iain Conn, Centrica’s chief executive, came in for repeated criticism from shareholders at the AGM but was defended by the company’s chairman. “It’s a competitive market and whether you like it or not we have to compete for the best person,” said Rick Haythornthwaite.

Shareholders also railed at the state of the company’s share price, which closed up by 2% at £2.02 but remains down from £2.30 last October. Conn said he shared the sentiment, and blamed the repeated threat of intervention by the government.

“There is only one factor driving [the share price] to where it is, and that is the uncertainty about what the Conservative government might do to the energy supply market.”

Conn also raised the spectre of accelerating the company’s cost-cutting plan to cope with the hundreds of millions of pounds staff analysts predict a price cap will cost Centrica. The chief executive said he could not rule out increases to the 1,500 job cuts already planned for 2017, in response to a cap, and added that most of the financial impact would be felt in 2018, not 2017.

British Gas had been talking to the government about alternatives to a cap, Conn said, such as scrapping standard variable tariffs in favour of a product that needs renewing annually. A similar proposal was put forward recently by Scottish Power, but a consumer group said it amounted to little more than a rebrand of standard variable tariffs.

Conn said he was also lobbying government to stop paying subsidies for low carbon power through energy bills, and support such “necessary” projects through general taxation.

John Penrose, a Conservative MP who has led calls for a relative price cap, said Centrica’s warnings of higher prices were an empty threat. “It isn’t sustainable for the big six to threaten they’ll scrap their cheapest tariffs. They would condemn themselves to a slow commercial death, milking a declining customer base because they wouldn’t win any new business.”

Analysts were divided over the impact of political intervention for Centrica. The Royal Bank of Canada noted that “political headwinds” had hurt Centrica’s share price, and described the trading update as negative. “Despite significant upside potential opening up to our price target, we would continue to avoid the name until there is better visibility on the competitive retail environment in the UK,” experts at the bank said.

However, Hargreaves Lansdown said that its guidance on the company remained unchanged, given the progress on its strategic targets.

“Long-term investors will be familiar with the tricks the weather and energy prices can play on Centrica’s profits, and will already be aware that recent trends in customer growth have been negative,” the investment group’s analysts said.

Comparison sites said that since Theresa May threatened to take action against energy suppliers in her 2016 party conference speech, tariffs had risen. Uswitch found the cheapest tariff among the biggest suppliers was £1,001.26 on 1 May, up from £836.21 on 1 October 2016.

