British Gas’s parent company Centrica announced today that it made its highest-ever profits in 2022: an “obscene” £3.3bn, more than three times as much as the previous year. It also announced its biggest round of shareholder payouts since the pandemic, as yields on Centrica’s shares reached a historic high of over 5%.

Last week, BP also announced record profits (£23bn), as did the UK’s other major oil company, Shell, in January ($40bn – more than double its previous record). More of these windfall profits are set to be distributed to shareholders than reinvested in the transition to clean energy.

Analysis of BP and Shell’s results shows that the two companies are doubling down on a status quo of huge shareholder payouts and large-scale investment in fossil fuels. In the case of Centrica, the bulk of its 2022 profits are derived from its North Sea oil and gas operations.

British Gas has recently come under fire for its role in the forced installation of prepayment meters for customers in arrears. While the practice of forced installations in England and Wales has been stopped temporarily following an order from energy watchdog Ofgem, it embodies the divide brought to the forefront by the energy crisis: as shareholders experience an almost unprecedented boom, many struggling customers face being moved to the even more expensive option of paying for energy in advance via a meter.

Centrica’s full-year results show that soaring profits in its North Sea division, and large profits in marketing and trading, nuclear and storage, are fuelling the firm’s huge windfall. However, the British Gas energy supply business saw its profits fall by 39%. As other suppliers have gone under, those energy companies engaged in extraction and generation have reaped the rewards.

Money for shareholders, not green energy

BP channelled more than half of its profits to shareholders, handing them 14 times as much as it spent on “low carbon investment”. The company’s investment in fossil fuels currently stands at £7.5bn, further endangering decarbonisation and putting to bed the company’s claim a decade ago that it was moving ‘Beyond Petroleum’.

Following a similar pattern to BP, Shell spent 7.5 times as much on payouts to its shareholders and twice as much on marketing as it invested in its ‘Renewable and Energy Solutions’ division – which in turn has come under fire for its green credentials.

With the UK lagging behind on its response to the climate emergency, the investment records of the energy giants pose huge risks to the need to decouple from oil and gas. As companies like Shell and BP double down on fossil fuels – energy sources prone to global shocks of the kind that has driven the current crisis – the case for transforming the energy system around public needs is clearer than ever.

While the spike in global gas prices has inflated Centrica, BP and Shell’s profits, the three companies have been making vast sums for years before the energy crisis. Analysis by the think tank Common Wealth found that between 2010 and 2020, Shell and BP channelled £147bn in share buybacks and dividends to their shareholders. Centrica came in at a comparatively smaller £7bn – though that’s hardly a tiny figure.

Although the majority of Centrica’s 2022 profits will not be channelled to shareholders, the proposed payout of more than £400m is by far its largest since before the pandemic.

A common response to criticism of energy companies’ profits is to point toward pension funds’ shares in firms – arguing that the pensions of those on low and average incomes would be hit by measures like a windfall tax. But, not unlike BP and Shell, Centrica’s top ten shareholders consist overwhelmingly of big asset management companies and investment banks such as BlackRock and Schroders, not UK-based pensions.

Over successive decades, not just in recent years, energy giants such as BP, Centrica and Shell have been making significant profits while failing to reinvest in a stable and clean energy system, leaving households exposed to global market volatility and eye-watering bills.

This goes to the heart of how our current energy system is structured. The for-profit private company, left to run the UK’s energy system since the 1980s, exists to maximise profits for the benefits of its shareholders. Which means that BP, Shell and other energy companies are working exactly as they are meant to.

They are not built to deliver a fair and well-managed transition to green energy, or to ensure stable and affordable energy bills. With this in mind, it becomes apparent that we need to radically reorient the energy system to deliver a thriving green future.

A publicly owned clean energy generator, delivering clean power at close to the cost of production – as Common Wealth has been calling for – should be a central part of this solution. A rethink of the whole energy system, with strategic planning and public investment as its key tools, can transition us away from fossil fuels, and towards an energy system capable of meeting people's needs.