British Gas has recently reported some of the largest profits ever. Yet, consumers are faced with increasing energy prices each and every year. In order to understand the process of profits in the gas industry and how they are applied by the companies, it is important to evaluate British Gas, their processes and the outcome of the money generated from these large profits.

British Gas

British Gas, a subsidiary of energy group Centrica, the biggest UK supplier of energy to residential customers has reported profits of £571m compared with £95m last year. This follows an unpopular price increase to customers of 15% as they passed on higher wholesale energy prices caused by the declining production in the North Sea. Consequently British Gas has had to import gas which is linked to the crude oil costs, now at a record level of $100 – a barrel. In addition, the costs of transporting gas through the European pipe network have been soaring.

Centrica said that wholesale gas prices fell in the first half of 2007 and this accounted for the profit despite their having passed on some of the cost saving to customers. Sam Laidlaw, chief executive of British gas explained that the profits would be used to fund £1bn a year investment in new gas generating plants and wind farms to meet government clean energy targets.

British Gas has invested in Ceres Power Holdings boiler technology which it hopes will reduce household emissions by 50%. The new boilers are powered by fuel cells which produce significantly less CO2 per year than standard boilers and it is claimed that this will cut the UK’s domestic emissions by the equivalent of eight power stations. The new British Gas boilers effectively generate electricity directly in the home obviating the need to transport electricity through the grid which is less efficient due to wastage. The Ceres fuel cell looks like a stainless steel CD case and stacked together make a powerful generator. It is anticipated that use of this new boiler will save households 25% per year on their energy bills.

Sam Laidlaw, CEO of Centrica, has recently said:

“Fuel cell technology has the potential to transform the domestic central heating market, enabling our customers to generate cheap, reliable and low-carbon electricity in their own homes. This agreement with Ceres Power will help us deliver our strategy of investing in low carbon technology development.”

In addition British Gas has been investing in wind farms to the tune of £300m so far this year and aim to increase this to £3bn over the next few years. Centrica already own off shore wind farms in Scotland and Lincolnshire but the cost of constructing and linking them to the national grid is about three times as expensive as building a traditional power station.

Sam Laidlaw has also said: “As the UK’s greenest energy supplier, this investment underlines our commitment to supplying British Gas customers with an increasing proportion of renewable electricity in the years ahead. Together with our existing gas fired generation and clean coal options, our investments in wind power will play a real part towards helping the UK move towards a low carbon energy mix.”

British Gas, Britain’s largest residential electricity supplier with 23% of the market, boasts the lowest carbon intensity of any major energy supplier and this new investment will consolidate its position. British Gas has been making strides to reduce energy over the long term by investing their profits in energy saving technology in the short term. While energy costs are currently high, renewable and alternative energy sources could mean better prices in the future.

Hot Water Tank Insulation

Having an uninsulated hot water tank is not that common nowadays but should you own an older property there is a chance that it’s not been done.

Hot water jackets can picked up from most DIY stores at very reasonable prices, Wickes sell one for just £12 which can easily be installed easily & pay for itself within a year.

Pipe Insulation

As above pipes can be insulated in a low cost manor & depending upon your willingness to crawl around in the loft & tight spaces can be installed at a relatively low cost, pipe packs cost a couple of pounds for 5, again from Wickes.

By insulating both your tank & pipes you could save £30 per year with a payback of less than 12 months!

We’re always being told of ways to reduce our bills and greenhouse gasses, these usually consist of expensive home improvements such as double glazing or energy efficient condensing boilers. So, I thought I’d put together a list of ways we’ve reduced our own heating bills without spending a fortune.

So here you go, 10 really simple things that you can implement that will start saving you money immediately…

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1) Turn electrical appliances off
How often do you go to bed at night with the TV on standby? Just turn it off, however, it’s not that simple is it? you might forget so it’s worth investing in a set of ByeBye Standby Savers these are available from Currys and should pay for themselves within a year.

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2) Turn Your Thermostat down by 1°C/1.8°F
Reducing you heating by just 1°C/1.8°F will shave about 10% of your heating bill, you probably won’t even notice the difference in temperature.

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3) Put a Flush Bag in your toilet cistern
Call you local water authority or council, most offer these for free and save 1 litre of water for every flush. You can also order them online from Severn Trent Water.

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4) Set your washing machine to 30°C/86°F
Washing clothes at 30°C/86°F not only saves you money but is kinder to your clothes. Unilever has put together an excellent guide to achieving best results whilst washing at 30°C.

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5) Turn lights out when leaving a room
I’d like to think this was an obvious one but my kids seem to think otherwise!

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6) Change Energy Supplier
Shop around and compare Gas & Electricity prices, you could find yourself saving up to £200 a year over your current supplier. When looking for a new tarriff bear in mind that it’s often cheaper to chose a ‘paperless’ plan that is managed on-line, also direct debit & dual fuel packages will earn you the biggest savings. Use comparison websites with caution, they often make assumptions about usage which may not reflect your lifestyle. The best way is to check your past bills & compare the tariffs side by side.

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7) Use electrical appliances wisely.

a) Only boil as much water as is required in a kettle or use a new energy efficient kettle.
b) Only use washing machines & dishwashers when full.
c) Use tumble dryers only when really necessary, is it sunny outside?
d) Defrost your freezer at least once a year, this will reduce energy usage.
e) When buying new appliances ensure they are ‘A’ rated.

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8 ) Check your hot water cylinder temperature
This can be a costly one, a cylinder shoud be run at 60°C/140°F. This is not only a reasonably safe temperature but is hot enough to kill off bugs, many cylinders are set a lot higher and are simply wasting energy. If your cylinder has a thermostat on it, check to see if it’s set at 60°C/140°F, it should look something like the picture below.

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9) Energy saving slight bulbs
Lame and obvious I know, but they are important and could save you up to £60 per bulb throughout it’s lifetime.

10) Insulation
I know I said I was keeping it to simple things but I think this is important as installing cavity wall insulation and also loft insulation can make such a difference. You may also find you can get it for free. if you are over 70 and are claiming certain benefits British Gas run a scheme called ‘Here to Help’ that offers free home insulation, can’t be bad.

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Ok, I digressed a little there at the end but if you do everything above you’ll really notice a difference in your bills, not only that you’ll helping the environment by reducing your Co2 emissions.