Centrica signals tough conditions

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Energy firm Centrica has said that market conditions have become "more challenging" following a rise in wholesale gas and electricity prices.

The owner of British Gas said the rise had altered the mix of its profits, and cut margins on gas and power sales in the UK's residential sector.

But, it added that it still expected to meet profit forecasts for the year.

The firm also said it managed to win back customers that had left in the first quarter, thanks to lower prices.

'Difficult environment'

Customer numbers rose by more than 900,000 after the firm cut prices in March and April.

British Gas now has 16 million residential users, although this figure is lower than the total prior to a series of price rises introduced last year.

Better customer service had helped to attract back customers, the firm said, but it acknowledged that service levels still had room for improvement.

Centrica warned it would be closely monitoring fuel bills in the light of rising wholesale prices.

"The high wholesale prices will, if sustained, create a more difficult environment for retail energy suppliers in the UK going into 2008," it said.