Friday, 29 July 2011

Centrica swims upstream

With £1.3bn of profit in only half a year, it's no surprise that Centrica is facing flak for putting up its gas prices by 18% and electricity by 16%.

Why can't it use those profits to take the pressure off hard-pressed energy users, goes the hue and cry?

There's a fairly simple answer, even if it's hard to sell to customers. A company that cross-subsidises its downstream sales (to customers) with profits from its upstream (pumping gas and oil out the ground) will get short shrift from investors.

It could do that short term, if it were used to grow market share. But the Windsor-based firm is growing its customer numbers anyway.

And it needs those profits and investors to keep investing in new resources, new generating capacity and renewed grid connections.

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