British Gas triumphs in domestic trials

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The Independent Online
British Gas has emerged as the surprise winner from the trials of domestic competition, according to confidential industry research, which shows the company has unexpectedly kept hold of the bulk of its highest spending customers.

The survey, commissioned by the Electricity Association for rival suppliers and seen by The Independent, shows that new entrants into the market have been most successful in persuading lower-spending households to abandon British Gas, the opposite outcome to that predicted.

It provides grim reading for independent gas companies, which are already grappling with non-existent profit margins, because the most recent trial involves one of the UK's most affluent regions. More than 300,000 homes have so far deserted British Gas in the latest trials, which involve 1.4 million homes in Avon and Dorset and Kent and Sussex.

In addition, a separate unpublished study into the first competition trial in Cornwall, Devon and Somerset, also by the Electricity Association, revealed that more than a third of customers who switched from British Gas were overcharged, some massively so, in their last bill from the company.

The most surprising finding from the first survey, carried out in June, is that new suppliers have grabbed their biggest foothold in the "C2" social bracket, which make up 28 per cent of homes that have switched supplier.

In contrast, the wealthiest households in the professional and managerial "AB" segment, who generally have the biggest gas bills, have given the experiment a notably cooler reception, accounting for 25 per cent of those moving to rival companies. Such customers, which provide gas suppliers with their main source of profits, could expect to make much greater savings on annual bills of at least pounds 500.

Even the lowest "DE" social category used by market researchers is responsible for some 23 per cent of homes which have left British Gas, attracted by savings of up to 25 per cent. More than half of the switchers lived in three-bedroomed houses, while just 20 per cent owned four-bedroomed or larger properties.

Privately, rival suppliers had hoped to grab a much larger slice of big- spending homes from Centrica, the demerged British Gas supply business. Though they are obliged to sell to all social groups, it would be much harder to make profits without a substantial proportion of wealthier consumers.

One independent supplier said: "Centrica must be laughing at these figures. It may not be intentional but they've managed to off-load some of their least profitable customers on to us."

The survey is likely to lead to renewed concern that profits in the domestic energy business are too small to encourage potential competitors like the supermarket chains or oil giants to join in. Groups such as Sainsbury's, Tesco and British Petroleum are all thought to have rejected selling gas, disappointing the industry regulator.

Of the four largest independent gas companies, Scottish-Power has been the most successful in the latest trials, according to the Electricity Association, with more than 35 per cent of its customers in the AB category. ScottishPower's market share of more than 22 per cent is also the largest, closely followed by Calortex, a joint venture between Calor and Texaco. But only 15 per cent of Calortex's customers are in the AB group.

Eastern Natural Gas, owned by the regional electricity group, is some way behind in fourth place, with 12 per cent of the market. Individual customers numbers have never been revealed by the regulator.

The second report, into customer satisfaction in the earliest competition trial, paints a bleak picture of widespread billing chaos, with 35 per cent of switchers claiming they were overcharged in their final British Gas bill. The research reveals that 15 per cent of consumers who switched supplier believed they were "massively" overcharged.

Some customers had hundreds of pounds accidentally debited from their bank accounts after British Gas miscalculated their final bills, a mistake blamed on faulty computer data. British Gas later apologised for the mess.