British Gas says competition has hit profits

British Gas has said the competitive nature of the UK's energy market was one of the reasons why its profits fell last year.

Operating profits at its residential energy supply business fell 11% last year to £553m, from £623m in 2015.

The company said this was partly due to a 3% fall in customer accounts, largely in the first half of the year.

The owner of British Gas, Centrica, reported a 4% rise in operating profit for 2016 to £1.52bn.

"The big message is that it's very competitive out there actually," said Iain Conn, chief executive of Centrica.

"We have seen increased metering and other costs coming through. We lost customers in the first half of last year. We are seeing pressure on our margins because there are 50 suppliers out there."

British Gas is one of the UK's "big six" energy suppliers, and there has been concern that these six companies are too dominant, limiting competition.

Earlier this month, the energy regulator Ofgem announced a cap on charges for pre-payment customers, and the government is due to publish a Green Paper in April which may further restrict the prices energy companies can charge customers.

But Mr Conn said: "I don't think this market is in any need of further government intervention.

"Standard tariffs are actually good value and our standard tariff is demonstrably good value and I think the government are understanding that this market is starting to change."

However, the government is concerned that two-thirds of all energy consumers remain on standard tariffs, which are the most expensive deals.

Loyalty programme

British Gas recently announced it was freezing its tariffs until August, against a backdrop of rising prices at some other large energy companies.

Big six rivals Npower, EDF and Scottish Power have all announced price rises in 2017. Npower was told by the regulator Ofgem to "justify" its 15% rise in electricity prices to its customers.

Mr Conn suggested some smaller independent suppliers were not making a profit.

"Some of them appear to be offering energy at a loss to them, and I'm not sure how sustainable that is. But some of the more vocal independent suppliers - actually their standard variable tariffs are above ours."

British Gas has also announced a loyalty scheme to reward existing customers. They will be able to get deals on TV packages, boiler maintenance, and reduced energy bills.