Utility Week - authoritative, impartial and essential reading for senior people within utilities, regulators and government
Issue link: https://fhpublishing.uberflip.com/i/378571
UtILItY WeeK | 12th - 18th september 2014 | 9 Interview I an Peters is the acceptable face of British Gas. Right now, you could almost say he's the only face of Brit- ish Gas – as the leadership at the very top of its par- ent company Centrica changes hands, managing director Peters provides continuity, appearing before select com- mittees and crucially running the company's response to the Competition and Markets Authority (CMA). It falls to him to defend vertical integration; competition within the energy market; British Gas itself, and its record of delivering for customers. It's a task he performs well. Today, in British Gas's Staines headquarters, Peters is friendly and welcom- ing, cracking the odd joke before settling down to busi- ness. "As it's Friday, my voice isn't in the best shape," he warns. "I've talked myself to a standstill this week." With British Gas at the centre of the storm over energy bills, despite its own profits falling by 26 per cent last year, there's plenty of talking to do. The company's strat- egy is a mixture of the defensive – arguing competition isn't broken, smaller suppliers are on the up and prices are fair – and the offensive – an aggressive rollout of smart meters in a bid to change the dynamics between supplier and customer. Change is the order of the day. A flurry of depar- tures from parent company Centrica over the past year, including financial director Nick Luff and downstream managing director Chris Weston, has been coupled with long-running speculation about the exit of chief executive Sam Laidlaw. In the summer, Laidlaw's retirement and replacement with former BP boss Ian Conn, who joins in January 2015, were confirmed on the same day that a 35 per cent tumble in group profits was announced. Within this, British Gas residential operating profits – Peters' domain – were down 26 per cent. How come? "Weather," he replies simply, in reference to the warm summer. Will next year see a new era ushered in for the UK's largest energy company? "We have a very clear strategy. I'm happy it's the right strategy, and have no compelling reason to change it. Do I expect the new leadership to change it? No. Can I guarantee that? No." As if this wasn't enough, the entire landscape of energy is under scrutiny by the CMA. Will everything be different in two years' time? Peters thinks so, but not for the reasons you might expect. "If the CMA was not undertaking its review, would the market be fundamen- tally different anyway? My answer to that is it could be significantly different." How so? Well, despite the small suppliers' vocal and visceral resentment of British Gas, the market leader remains benignly supportive of them, in words at least. Peters reports: "When the next market share data comes out, I think they may be around six per cent, which is three times what they were a year ago. We had 19 new suppliers in the market last time I counted. There are more entrants coming in all the time with a range of dif- ferent propositions. Most of them clearly have a price advantage by dint of the small suppliers' exemptions and they're growing strongly. I see no reason why that shouldn't continue over the next couple of years." Meanwhile, smart meters will change the game, Peters reckons. British Gas has firmly staked its hand on the success of the new technology, having rolled out more than a million domestic smart meters ahead of the start of the official programme, and owning around 70 per cent of the market. This, says Peters, is already pay- ing dividends, with calls and complaints lower by one- fih among smart metered customers, compared with British Gas's other customers. Peters is a smart meter evangelist. He believes the root of the public's problem with energy companies is in the bill – "understandably so, you wouldn't pay for your groceries based on an estimate" – and hopes the accurate, transparent billing provided by smart meters will change this dynamic. It will create informed custom- ers who can work with their supplier to manage down their energy bill. Peters quotes British Gas's partnership with remote thermostat provider Hive: "A typical UK householder will change their thermostat twice a year, a Hive customer changes it twice a day. What is stagger- ing is customers with Hive – and we have over 100,000 now – are 40 percentage points more satisfied than those without. It speaks right to the heart of this choice and control issue." If the market is fixing itself, does Peters believe the CMA inquiry is unnecessary? "No, it's not unnecessary. The industry has been subject to a massive amount of media and political commentary over the past two or three years, some of which is fair, some unfair. To have