Fleeing customers dim lights at British Gas as price cap hits

Shares in British Gas owner Centrica suffered a major power failure on Thursday as hundreds of thousands more customers deserted the firm and it took a £70 million hit from the looming cap on household bills.

Production hiccups at Centrica’s oil and gas production and nuclear arms added to the woes of the FTSE 100 group, dragging down the stock more than 8%, or 11.95p, to 133.8p.

Ofgem has confirmed that the cap on standard variable rate bills will be set at £1137 for direct debit customers in the first quarter of next year.

This is £68 lower than British Gas’s current standard variable tariff, which 3.1 million of its customers currently pay, leading to a “negative near-term impact on earnings and cash flow”.

British Gas also paid the price for its second hike in bills last August, as it lost another 372,000 gas and electricity accounts in the four months to the end of October amid intense competition for customers.

The losses came as it moved customers off standard variable tariffs ahead of the cap, which is to be introduced in January.

The move puts pressure on many suppliers and recently prompted SSE and Npower to renegotiating the terms of their planned merger.

Centrica’s energy production business also disappointed the City as it flagged up a jolt to overall results from lower production in its Spirit Energy exploration and production arm.

Forecast production for 2018 has fallen to about 47.5 million barrels of oil equivalent, from around 50 million in the summer, due to “unplanned outages and operational issues”. Production levels will be flat next year.

Meanwhile extended inspections and outages at the Hunterston B power station in Scotland and Dungeness B on the south coast, means that Centrica’s share of nuclear generation from its 20% stake in EDF’s British nuclear plants was expected to be 0.2 terrawatt hours lower than previously thought.

The Hunterston unit, which can produce enough electricity to power more than 800,000 homes, has been offline since March when cracks were found in its core during a routine inspection.

UBS’s Sam Arie called the update “significantly negative”, with 2019 “not looking to get any easier than 2019”.

“The case for a reset or wider rethink of pricing strategy at British Gas may start to build,” he added.