Shares in Centrica, the UK's largest domestic energy supplier, climbed 4.5 per cent to 387.5 pence after operating profits exceeded the City's expectations, falling only 5 per cent to GBP 1.44 billion.
The company revealed its electricity and gas customers in the UK fell to just over 16 million in 2006 as it lost almost 30,000 a day. New chief executive Sam Laidlaw admitted the company had been forced to raise its game as price increases coincided with new computerized billing.
"I think we've gone a long way already in the process but I think we do have to improve on customer services."
While call time averages had improved, Laidlaw said the losses of 2006 had been caused fundamentally by higher prices, which have now been cut, in the first reduction the company has made since 2000.
"The big reason we lost customers last year was because we weren't competitive on price, because our electricity came from gas powered generation, which was significantly more expensive than competitors who had coal powered generation."
Laidlaw said that, as the wholesale price for gas was now falling, the balance had moved back to gas, meaning the company had been able to move its prices "significantly further and faster than our competitors thought", leading to a jump in sales.
"Since we dropped the prices we're doing very well on sales. Our customers are coming back to us and we're excited about that."
British Gas's decision to cut retail prices have sparked a mini price war, with Powergen, Npower and Scottish & Southern Energy all since pledging to follow suit.
Centrica came further under attack from consumer groups over its delays in cutting prices, after the British Gas division returned a profit of 95 million Pounds in 2006, following a loss of more than 140 million Pounds in the first half of the year.
However, yesterday's figures found favour with the City. Analysts at Goldman Sachs said the results were strong and upgrades on the stock were likely.
"Centrica's better-than-expected 2006 results indicate the pending benefit of the decline in wholesale energy prices over the last few months and the potential for strong earnings growth in 2007," they said in a note.
Laidlaw said the strategy for 2007 included further cost-cutting. The company said it would trim about 1,550 jobs, slightly more than the 1,300 it earlier predicted.