British Gas could lose 10% of customers on day one

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The Independent Online
British Gas is likely to lose 10 per cent of its customers on the first day of trials of domestic competition, starting in the South of England from next month, according to the latest forecast from one of the leading independent suppliers.

Calortex, a joint venture formed by Calor and Texaco, said it had analysed advance contracts signed by its marketing team which showed the interest in moving from British Gas was much stronger than in the first competition trial, which began in the South-west last May.

In this earlier trial about 6 per cent of customers switched on the first day through advance orders, a figure which disappointed some suppliers.

The forecast would mean British Gas could lose around 150,000 customers on the first day of the second phase of the competition trials alone. If the same occurred when full competition is introduced by next year it would mean some 2 million homes rejecting British Gas.

So far 14 companies have been granted licences to sell gas in the second phase of the trials, involving 1.5 million households, which starts in Avon and Dorset from 10 February and in Kent and Sussex from 7 March. Ofgas, the industry watchdog, granted four new licences last week, of which three went to regional electricity companies.

The new trials are seen by industry experts as the real test of whether British Gas will lose a substantial chunk of its customer base, following well publicised complaints over service and billing problems.

Neil Lambert, joint general manager of Calortex, said: "We've found the switch rate is definitely much higher in the second phase than in the first phase. It could easily reach 10 per cent of customers in both sides of the market. Research we did in the South-west suggested people there were less likely to change supplier than in other parts of the country. In the South-east people are less conservative."

Almost 87,000 customers have so far moved from British Gas in the earlier trial, which involves 500,000 homes in Devon, Cornwall and Somerset. Calortex is thought to be the market leader in the South-west after British Gas.

Customers have been lured by discounts of up to 25 per cent from British Gas prices, with most offering to cut more than 15 per cent off gas bills. Rival companies can take advantage of last year's massive drop in the market price of gas, while British Gas is locked into buying gas at around 25 per cent above the "spot" price through its "take-or-pay" contracts.

A spokesman for British Gas Trading, the supply business, said it was too early to make accurate predictions about the second competition trials. "It's all just guesswork at the moment. We're obliged to lose market share anyway because we're the incumbent monopoly supplier at the moment. But the indicators were in the South-west that many more customers would switch than actually did in practice. The real test will be over a period of time and not at the beginning."

Rival suppliers are using a variety of advertising and some controversial doorstep selling techniques to persuade customers to switch from British Gas. Eastern Natural Gas, part of the regional electricity company owned by Hanson, has already been criticised by Ofgas for allegedly misleading customers.

Meanwhile, BP announced a $1bn deal to supply Ruhrgas of Germany with 15 billion cubic metres of gas over 15 years, from BP's North Sea fields.

This is BP's first sale of gas to continental Europe from the UK and the first time it has used the capacity it owns on the interconnector pipeline across the North Sea.

BP also said its share of the UK commercial and industrial gas market had more than doubled since August last year when it restructured its gas marketing activities. It is second to British Gas.