British Gas owner Centrica has said its full-year pre-tax profits will be in line with expectations, despite "more challenging" market conditions.
In a trading update the company stressed it had performed well in 2007, despite rising wholesale gas prices in recent months.
Centrica warned higher wholesale gas prices had reduced margins for gas and power sales in the UK residential market, but said it still expected British Gas to be profitable in the second half of the year.
It confirmed full-year margins were still set to be higher than long-term expectations due to the strong first-half experienced by the company.
But in a warning about the potential impact of rising wholesale prices, Centrica flagged up the possibility of higher energy bills for its customers.
"Looking forward, the high wholesale prices will, if sustained, create a more difficult environment for retail energy suppliers in the UK going into 2008," the company stressed.
"We will continue to monitor this with regard to future pricing policy."
Centrica revealed British Gas had continued to add residential customers in the second-half, regaining the number lost in the first-quarter.
British Gas' residential business now has 16 million customer accounts, with Centrica attributing the recovery of its customer base to the lowering of tariffs in March and April and improving customer service.
"Although we have made substantial progress here, improving customer service further remains a key priority," stressed Centrica.
The energy group, which will announce its full year results on February 21st, added it remained on track to achieve its cost reduction targets.