British Gas loses a million users

Wholesale gas prices have risen sharply this year

British Gas has lost almost one million customers this year, its parent company Centrica has revealed.

The gas and electricity provider, which has put up prices twice in 2004, lost 290,000 customers in the first half of the year and 630,000 in the second.

Centrica, which has been hit by a rise in wholesale energy prices, said market conditions remained challenging.

Its shares closed 8.2% lower at 229.5 pence, despite Centrica saying annual results would meet expectations.

Reduced margins

Centrica said it expected to maintain double-digit year-on-year percentage growth in earnings for 2004, and added that 2005 results were also seen in line with market forecasts.

Centrica is clearly trying not to lose too many more customers and get churn under control by absorbing some of the cost Analyst Clive Roberts Check Centrica's share price

Yet it warned that high energy prices remained problematic.

"In summary, the key issue facing Centrica in 2005 is the current level of UK wholesale energy prices," the company said in a statement.

"As a result operating margins are now expected to be lower than previously anticipated in British Gas, Centrica Business Services and industrial and wholesale."

Earlier this year, the company sold its Automobile Association (AA) unit for £1.75bn ($3.35bn) to return cash to shareholders.

Clive Roberts, an analyst at brokers Charles Stanley, said it was "clearly good news" that Centrica would be able to maintain margins at British Gas despite the challenging conditions.

"They are clearly trying not to lose too many more customers and get churn under control by absorbing some of the cost," he added.

Other providers

According to industry watchdog Energywatch, UK gas prices have risen by 19.03% this year.

It said that as a result, gas customers will now be paying £5.2bn more for their fuel this winter.

"Use consumer power now and switch to another company," said Energywatch.

"Customer loyalty isn't worth the bill it's written on."