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10 | 12th - 18th september 2014 | UtILItY WeeK Interview the CMA look at this in a data-driven, hard- nosed way is something we all welcome." Peters, who himself has been subject to aggressive coverage by the tabloid press, will not be drawn on the CMA's potential findings ("it's far too early"). He does take a moment to note that of the inquiry's four theories of harm, three relate to vertical integration. Peters says the industry "has not done itself any favours" with opaque reporting around vertical integration – a message he is all the more eager to deliver since British Gas changed its reporting two years ago, to include self- supply figures, profits by fuel type and trading profits. "I would absolutely urge all the industry to get to that level of disclosure." He is also keen to emphasise British Gas's active role in the markets – last year, it self-supplied just 14 per cent of its power. Peters puts an eloquent defence, but with the indus- try's reputation in tatters, will the market leader admit to any mistakes? Like the politicians to whom he has to answer, Peters doesn't like the word 'mistakes', but will admit to historical failings on customer service: "We've not been as good as we should have been consistently at the very basics of customer service." He also acknowledges the baffling complexity of tar- iffs that led to Ofgem's intervention with the retail mar- ket review (RMR): "Two or three years ago, we had a lot of products in the market. From that point of view, the Ofgem intervention on narrowing the product range in principle was the right thing to do." Back to the mistakes – though Peters prefers the term "challenge and opportunity" for this one: "The way we have explained price changes has not been as good and compelling as it probably could have been. We've got better over the years, but the very fact that people take out of the price increases that it's about putting profits up, which in our case is palpably not true, must say we could do better job on communication. We are planning to do something about that shortly by radically rethink- ing how we communicate to our customers." Tell us more? "Watch this space. It's around the theme of sim- plicity and transparency." Peters elects not to mention what comes up in later questioning – the mis-selling of British Gas products by Sainsbury's that led to a public mea culpa and a £1 mil- lion compensation package this summer. The market leader had been proud of being the only one of the big six to escape the mis-selling scandal – how did it feel to have to put their hands up? "I was hugely disappointed, and yes, it was a sur- prise. What we then did, in terms of mounting a full and thorough investigation, says a lot about how we behave." As market leader, does British Gas hold itself to a higher standard of responsibility? "To a degree, yes. We set our own bar pretty high, and we think it's right that we should." As British Gas acknowledges in its CMA submission, the heart of the public's problem with energy companies is the spiralling price – fix that and the rest is noise. It's become all the more heated this summer, as the price of wholesale gas has fallen significantly, yet customer bills remain high because the major energy companies buy their supply on long-term fixed price contracts, which hedge their risk. Is that in customers' best interests? "It is clearly a statement of fact that the wholesale price of gas in the spot market has been falling through 2014. Yes, we hedge, and we all hedge in different ways and in different lengths. Why we do that is for two rea- sons, both for the benefit of the consumer. One is to secure supply, that's about the physical hedging, and when you've got the best part of eight million customers using gas, it's important you secure supply for the longer term; second is to smooth out price volatility, because this works both ways. In the contra-example to what's happening now, in Easter last year, for a variety of reasons, whole- sale gas doubled, and we had something looming in terms of a gas shortage. Despite wholesale prices dou- bling, retail prices didn't change." Shouldn't customers have the choice to reflect the cycle? "Sure – we have tried on three occasions since I've been doing this job in 2007 to launch tracker products and some of our competitors have also tried. They have never worked on any scale. I wouldn't give up on it, but the reasons they have struggled to work are still there." British Gas has had some success with a "fix and fall" tracker product, but Peters says trying to find room for this inside the four tariffs allowed by RMR is difficult. "You're going to ask me what the right number is now, aren't you?" he anticipates. "I'd probably say six. Not ten." Will RMR have to be reviewed? "Inevitably." Meanwhile, Ofgem and the industry are in a "learn- ing phase" over exemptions and derogations, with white label arrangements such as British Gas's massive Sains- bury's deal, for example, currently exempt and looking ever more likely to win a permanent exemption. On to British Gas's legacy customers. As the market leader and the former monopoly, it has the greatest num- ber of customers who have never switched: one figure quoted in the market is 42 per cent. Not so, says Peters emphatically: "If you work through what's happened with switching since the market got liberalised in 1997, you get down to a number quite quickly where less than seven per cent of our custom- ers are in the same state they were a few years ago. The 42 per cent I think is an Ofgem number, which is palpa- bly untrue." Ironically, such disputes over figures are one of the biggest barriers to trust in the market. The unholy row every time Ofgem releases its supply market indicators doesn't help anyone. Another battle of claim and coun- ter-claim is being fought with the networks. British Gas wanted network costs included in the CMA inquiry, and insists they are going up. Peters warns against the offi- cial numbers from the Department of Energy and Climate Change and Ofgem, which have them falling, saying this is in real terms, taking into account inflation. The next network price control for electricity distribution sees costs coming down, again in real terms, but Peters says this is only part of the picture. The networks furiously disagree: they were up in arms at British Gas's attempts to pull them into the inquiry. Peters fights such battles well; he has a difficult case to make, and remains plausible and likeable in doing so. Whether that will be enough for the CMA remains to be seen. "We've not been as good as we should have been consistently at the very basics of customer service" Keynote speech Ian Peters will be delivering a keynote address on "innovation and competition in the energy sector" at the Utility Week Congress on 14-15 October. Other speakers include Ofwat chief executive Cathryn Ross, Ofgem chief executive Dermot Nolan and Scottish Power chief executive, retail and generation, Neil Clitheroe. For more information and to book your place, visit www.uw-congress.net