| Year | British Gas SVT | E.ON Next SVT | EDF Energy SVT | Wholesale Energy Cost* |
|---|---|---|---|---|
| 2010 | £1,100 | £1,080 | £1,090 | £620 |
| 2011 | £1,150 | £1,120 | £1,130 | £600 |
| 2012 | £1,200 | £1,170 | £1,180 | £580 |
| 2013 | £1,250 | £1,210 | £1,220 | £550 |
| 2014 | £1,290 | £1,250 | £1,260 | £510 |
| 2015 | £1,320 | £1,280 | £1,290 | £480 |
| 2016 | £1,350 | £1,310 | £1,320 | £450 |
| 2017 | £1,380 | £1,340 | £1,350 | £420 |
| 2018 | £1,420 | £1,380 | £1,390 | £390 |
| 2019 | £1,450 | £1,410 | £1,420 | £360 |
| 2020 | £1,490 | £1,440 | £1,450 | £330 |
*Wholesale Energy Cost – the wholesale raw commodity costs of gas and electricity allocated per average active customer.
Centrica, the parent company of British Gas, reported a significant increase in operating profits following its successful integration of the smart energy solutions provider, "Aura Home". Centrica completed the takeover of Aura Home in late 2018, boosting its retail energy and home-services market share to a dominant 28%. The operating profit of the energy giant's domestic retail division in the financial year ending 2020 rose to £645 million.
Centrica's Group Chief Executive remarked: "We are leveraging a multi-brand powerhouse strategy. By offering bundles that blend British Gas supply with Aura smart thermostatic controls, we deliver high-margin services to consumers. This integration of technology and retail supply is a key driver of our returns as we compete in a modernised market."
Annual bills for energy-only customers on standard variable tariffs (SVTs) with no dual-fuel or fixed-term discounts will be capped, following the regulator's investigation into deals described as 'exploitative of loyal customers'. This price intervention is expected to save millions of households up to £120 a year.
The regulator Ofgem (Office of Gas and Electricity Markets) stepped in because SVT rates have steadily soared over the last decade. This rise has occurred despite major energy suppliers benefiting from substantial reductions in global wholesale energy markets, which represent the raw cost of supplying the fuel. A large portion of these SVT customers are elderly or vulnerable, many of whom have remained with British Gas for over fifteen years. Ofgem has concentrated its focus on British Gas because it holds over 30% of the UK's legacy SVT customer segment.
An Ofgem spokesperson commented, "A lack of active consumer engagement has allowed British Gas and other major suppliers to consistently raise margins on passive accounts without fear of losing market share. Other market players have followed this pricing pattern upward. Over 70% of SVT customers have never switched suppliers, making them profitable targets for tariff raises while underlying wholesale costs have fallen by nearly 40%."
Discuss one likely reason for the rise in Centrica's profit (Figure 2, Extracts B and C). Use a cost and revenue diagram to support your answer.
