* North American cold snap cost firm 65 million pounds
* British Gas average bill seen down 90 pounds/year on less use
* Still expects Russian gas imports to start in October
* Says does not fear outcome of market authority probe (Updates with details, comments on market authority probe, Russian supply)
By Susanna Twidale
LONDON, July 31 (Reuters) - British utility Centrica posted a 35 percent fall in operating profit for the first half of the year as a mild winter in its home market led to reduced energy demand and extreme weather in North America increased costs.
Centrica made 1.032 billion pounds ($1.75 billion) in operating profit, down from 1.583 billion a year earlier, it said on Thursday.
The company was hit by 65 million pounds of costs relating to the polar vortex cold snap that hit North America earlier this year. It also posted write-offs of 40 million pounds relating to the cancelled Celtic Array windfarm project.
"The first half of the year has seen challenging market conditions across the group, both as a result of the weather and reflecting the wider political environment," Centrica chairman Rick Haythornwaite said in a statement.
Revenues increased by 15 percent to 15.7 billion pounds, which the company attributed mainly to a more than doubling in turnover at its North American Direct Energy subsidiary, boosted by the near $1 billion acquisition of Hess Corp's energy marketing business.
Basic first-half earnings per share (EPS) fell 29 percent to 10.5 pence and the company said it expected full-year EPS to be in the 21-22 pence range.
Operating profits at Centrica's British Gas arm fell 20 percent to 455 million pounds in the first half as a mild winter led to lower-than-usual energy consumption.
Centrica said it did not expect any changes to residential prices in 2014 but noted average household bills are likely to be around 90 pounds lower for the full year, or down 7 percent compared with 2013, as customers used less energy.
Britain's big six energy suppliers - SSE, Scottish Power, Centrica, RWE npower, E.ON and EDF Energy - control around 96 percent of the market and are under scrutiny ahead of a national election next year because of public outrage over rising bills.
Britain's competition authority launched an investigation in June after industry regulator Ofgem said the market was not competitive enough..
Centrica is "not fearful of the process in any way" and the company welcomes the independent investigation, chief financial officer Nick Luff said in a conference call on Thursday.
The Competition and Markets Authority is expected to report its findings by Dec. 25, 2015 and could go as far as enforcing a break-up of energy suppliers if it finds they are breaching competition rules.
Centrica has put three power plants at Langage, Killingholme and Humber - accounting for the majority of the utility's conventional generation capacity at 2.7 gigawatts - up for sale, a process Luff said could take some time.
Mark Hanafin, managing director of international upstream at Centrica, said the company was "clearly struggling" with gas-fired power generation, which makes up the core of its business, as it has zero or negative margins. However, its renewables and nuclear divisions were performing well.
Luff said Centrica still expects to receive its first supplies of gas from Russia in October this year despite an escalation in sanctions placed on Russia by Europe following the downing of a Malaysian airliner in Ukraine.
"We expect to take delivery of that gas and if anything changes then we will have to deal with that," he said, adding that the volumes involved are a small portion of Centrica's overall gas supply.
Centrica signed a deal in 2012 with Russian state-controlled Gazprom to import 2.4 billion cubic metres of gas over three years, starting in October 2014.
The European Union and the United States on Tuesday announced further sanctions against Russia, targeting its energy, banking and defence sectors, but the measures stayed clear of disrupting Russian energy flows to Europe.
The utility said on Tuesday it had appointed former BP head of refining Iain Conn as its new chief executive. Conn will replace Sam Laidlaw, who has been at the helm of Centrica for eight years. (1 US dollar = 0.5911 British pound) (Editing by Dale Hudson and Jane Merriman)