Sam Laidlaw on British Gas’s ‘trilemma’ and why he mentioned blackouts

 

Sammy Two Pools is sitting in front of me. That’s tabloid-speak for Sam Laidlaw, chief executive of Centrica, parent company of British Gas.

We’re in his office in Mayfair. In October last year, two days after British Gas said it was raising the price of electricity by 10.4 per cent and gas by 8.4 per cent, it was revealed that Mr Laidlaw was having a second swimming pool built at his home in the Cotswolds. The red-tops and the left vented their wrath.

This week, he was in their sights again. When Ofgem said it was launching the deepest ever investigation into the Big Six power suppliers, Mr Laidlaw warned that the uncertain industry climate could lead to the halting of new investment, and blackouts. Cue his occupying virtually the entire front page of the Daily Mirror and an extra moniker: “The Blackout Blackmailer”.

But new money coming into the industry, Mr Laidlaw says, has virtually ground to a halt. By 2020, the UK will be relying on imports for 70 per cent of its gas needs.

“In primary energy, the UK’s production of gas is falling rapidly. North Sea oil and gas output has fallen by 38 per cent over the last three years… So, when it comes to security of supply there is a pressing need for solutions.”

Yet politicians are falling over themselves to slate the energy companies, with British Gas, the supplier of gas to 15 million homes, the principal villain.

How have things got so bad?

“There’s been a lot going on. Ever since the credit crunch there’s been disdain for large businesses generally. Household incomes have been flat to falling, so a lot of people have been feeling the pinch,” he says.

“We’re mandated to replace power stations, and that puts costs up, which in turn puts bills up. So it was always going to be difficult.”

Yes, but this difficult?

He smiles a rueful smile. “We’ve always tried to do our pricing efficiently, to take a more pragmatic approach. It’s worth going back to 2007, when household incomes were increasing and all prices went up sharply. In 2007, bills went up by 50 per cent, then we brought them down. But there was little of this. The main change is the lower disposable income for households, plus politicians are capitalising on the situation and making promises they will find hard to deliver.”

It’s not the level of interest he resents – he understands that – but the interference based on ignorance.

“This business is so interwoven with the fabric of Britain and the fortunes of our customers that it can make a real difference to the quality of life. It never can be like any other business with just a profit motive; we’ve always got a much broader agenda. So we’ve got social programmes that have seen 1.8 million customers helped with their bills, and another half a million given extra assistance.”

He is not stupid: “We’re not expecting to be immune from politics.” What’s causing the difficulty is the sheer short-termism of those doing the shouting, the lack of vision for Britain’s long-term energy needs. That’s what he finds hard to countenance.

It’s worse for British Gas and its owner, he accepts, because it was once the state-owned supplier.

“There are some customers and politicians who still yearn for the old model. What they forget is what we’ve achieved. Fiercer competition has delivered lower prices and we’ve delivered choice. None of that would be there if we were nationalised.” Contrary to what some may aspire to, “we can’t put the clock back. We’re now in an international market and the sums of capital required are huge. We need foreign capital, foreign investors, to meet that challenge.”

People “forget how far we’ve come. We know what our job is, to make the service as best as we can while delivering energy at the lowest possible cost. Even as recently as 2006 there were 16 million exceptions [where the bill has to be checked or authorised by a human and can’t be processed automatically] and people complained they could not get through on the phone. We’ve come a long way since then, we’re now much more efficient.”

At the CBI conference last November, Mr Laidlaw sprang a surprise when he announced he would not be taking his annual bonus, which could have been worth around £1.7m.

“I wasn’t doing it for personal acclaim,” he says. “The pay of the CEO had become an emotive issue. It was distracting from what we call the ‘trilemma’, of having secure supplies of energy at affordable prices while meeting climate change objectives.” If, by forfeiting his bonus, he could get people to focus on these issues rather than his pay, then his step was worthwhile.

“In the US, [executive pay] is not even raised. In the UK, it’s not a very edifying debate we’re having, especially as we’re trying to get our companies to compete on the world stage. In the US, entrepreneurs and big business are celebrated and supported; in the UK there is scepticism, which can be unhelpful.”

What about the opprobrium surrounding his old school – Eton – and his manor house?

He grimaces. “I took the job knowing it was a high-profile job. Where it crosses the line is when it affects my family [he and his wife, Debbie, have four children]. They’re entitled to their privacy.”

He pulls a face. His job “is always going to be controversial; I guess it’s become more controversial. Ironically, it’s not because bills are going up 2 to 3 per cent a year. The increase is actually lower than inflation, but the difference is that household incomes have been going down. Energy is a growing portion of household expenditure – and politicians are wanting to cash in on that.”

He is frustrated by Labour leader Ed Miliband’s prices freeze and break-up call. “It was a surprise to us, because he’s been Energy Secretary and knows the issues. He’s highly intelligent but economically flawed.

“We’ve had conversations with him. He has a view that the markets don’t work and he wishes to control them. But the price of gas is set internationally. No matter how much he wishes to control it, he can’t. It’s as though Miliband wants to take us back to the days of the nationalised British Gas, when it was a monopoly buyer from the North Sea and set the price. Those days are over.”

Investors, Mr Laidlaw says, will turn away. “If they can’t get a return from investing in our energy market they will go elsewhere.”

Is that a threat? He shrugs. “No, just the way it is.” We desperately need their backing for new power stations, he repeats, for reducing our reliance on imported fuels.

Is he fed up? There has been what looks like well-informed speculation in the press that this year will be his last.

“Every day I look forward to trying to solve the equation of running Centrica and trying to do the right thing, because we’ve got fantastic people here and they do not deserve it.” He pauses. “You know, all the controversy does is to create a greater sense of loyalty among all of us to this business.”

Nevertheless, is he leaving? “Chief executives can stay too long in their jobs. From time to time management teams needs refurbishing.”

So that’s a yes, then? “When the right time comes I will seek to make an orderly succession.” He beams. “And I’m not there yet.”

* A fuller version of this interview is contained in the April issue of Management Today magazine and at www.managementtoday.co.uk

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
The Doctor and Clara have their first real heart to heart since he regenerated in 'Deep Breath'
TV
Life and Style
Apple showed no sign of losing its talent for product launches with the new, slightly larger iPhone 6 making headlines
techSecurity breaches and overhyped start-ups dominated a year in which very little changed (save the size of your phone)
Arts and Entertainment
Jamie Oliver
filmTV chef Jamie Oliver turned down role in The Hobbit
News
The official police photograph of Dustin Diamond taken after he was arrested in Wisconsin
peopleDownfall of the TV star charged with bar stabbing
PROMOTED VIDEO
Arts and Entertainment
Jeremy Clarkson, left, and Richard Hammond upset the locals in South America
tvReview: Top Gear team flee Patagonia as Christmas special reaches its climax in the style of Butch and Sundance
News
people
Sport
Ashley Barnes of Burnley scores their second goal
footballMan City vs Burnley match report
Arts and Entertainment
Peter Mayhew as Chewbacca alongside Harrison Ford's Han Solo in 'Star Wars'
film
News
i100
Arts and Entertainment
Man of action: Christian Bale stars in Exodus: Gods and Kings
film
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Arts and Entertainment
Tracy Emin's 1998 piece 'My Bed' on display at Christie's
artOne expert claims she did not
News
Ernesto Che Guevara and Fidel Castro, right, met at Havana Golf Club in 1962 to mock the game
newsFidel Castro ridiculed the game – but now investment in leisure resort projects is welcome
News
Hackers revealed Oscar-winning actress Lawrence was paid less than her male co-stars in American Hustle
people
Arts and Entertainment
Clueless? Locked-door mysteries are the ultimate manifestation of the cerebral detective story
booksAs a new collection of the genre’s best is published, its editor explains the rules of engagement
Sport
Robin van Persie is blocked by Hugo Lloris
footballTottenham vs Manchester United match report
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Selby Jennings: VP/SVP Credit Quant- NY- Investment Bank

Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...

Selby Jennings: Quantitative Research | Equity | New York

Not specified: Selby Jennings: Quantitative Research | Global Equity | New Yor...

Selby Jennings: SVP Model Validation

Not specified: Selby Jennings: SVP Model Validation This top tiered investment...

Selby Jennings: Oil Operations

Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

Day In a Page

A timely reminder of the bloody anniversary we all forgot

A timely reminder of the bloody anniversary we all forgot

Who remembers that this week we enter the 150th anniversary year of the end of the American Civil War, asks Robert Fisk
Homeless Veterans appeal: Former soldiers pay their respects to a friend who also served

Homeless Veterans appeal

Former soldiers pay their respects to a friend who also served
Downfall of Dustin 'Screech' Diamond, the 'Saved By The Bell' star charged with bar stabbing

Scarred by the bell

The downfall of the TV star charged with bar stabbing
Why 2014 was a year of technological let-downs

Why 2014 was a year of technological let-downs

Security breaches and overhyped start-ups dominated a year in which very little changed (save the size of your phone)
Cuba's golf revolution: But will the revolutionary nation take 'bourgeois' game to its heart?

Will revolutionary Cuba take 'bourgeois' golf to its heart?

Fidel Castro ridiculed the game – but now investment in leisure resort projects is welcome
The Locked Room Mysteries: As a new collection of the genre’s best is published, its editor Otto Penzler explains the rules of engagement

The Locked Room Mysteries

As a new collection of the genre’s best is published, its editor explains the rules of engagement
Amy Adams on playing painter Margaret Keane in Tim Burton's Big Eyes

How I made myself Keane

Amy Adams hadn’t wanted to take the role of artist Margaret Keane, because she’d had enough of playing victims. But then she had a daughter, and saw the painter in a new light
Ed Richards: Parting view of Ofcom chief. . . we hate jokes on the disabled

Parting view of Ofcom chief... we hate jokes on the disabled

Bad language once got TV viewers irate, inciting calls to broadcasting switchboards. But now there is a worse offender, says retiring head of the media watchdog, Ed Richards
A look back at fashion in 2014: Wear in review

Wear in review

A look back at fashion in 2014
Ian Herbert: My 10 hopes for sport in 2015. Might just one of them happen?

Ian Herbert: My 10 hopes for sport in 2015

Might just one of them happen?
War with Isis: The West needs more than a White Knight

The West needs more than a White Knight

Despite billions spent on weapons, the US has not been able to counter Isis's gruesome tactics, says Patrick Cockburn
Return to Helmand: Private Davey Graham recalls the day he was shot by the Taliban

'The day I was shot by the Taliban'

Private Davey Graham was shot five times during an ambush in 2007 - it was the first, controversial photograph to show the dangers our soldiers faced in Helmand province
Revealed: the best and worst airlines for delays

Revealed: the best and worst airlines for delays

Many flyers are failing to claim compensation to which they are entitled, a new survey has found
The stories that defined 2014: From the Scottish independence referendum to the Ice Bucket Challenge, our writers voice their opinions

The stories that defined 2014

From the Scottish independence referendum to the Ice Bucket Challenge, our writers voice their opinions
Stoke-on-Trent becomes first British city to be classified as 'disaster resilient' by the United Nations

Disaster looming? Now you know where to head...

Which British city has become the first to be awarded special 'resilience' status by the UN?