British Gas hit by mass customer exodus after price hike
British Gas lost 362,000 accounts last year after a 9.2% hike in prices in November
The tide took a decisive turn against the big six energy providers yesterday after British Gas conceded it had lost getting on for half a million customers in the past 14 months following its much-criticised price hikes.
British Gas said it lost 362,000 accounts last year, as a 9.2 per cent hike in prices in November accelerated an exodus of financially-struggling customers, while a further 100,000 have left so far this year.
Together with lower-than-normal heater use due to the mild winter, the exodus pushed British Gas’ profits down by 6 per cent to £571m for 2013.
Opponents of British Gas said that even this reduced profit level was far too high and demonstrated the need to shake up the energy market to make it more competitive.
Adam Scorer, director of Consumer Futures, said: “The announcement of Centrica’s profits will inevitably cause anger at a time when so many customers are struggling to pay their bills.”
“But anger won’t help customers, only action to reduce their exposure to rising prices will…[Energy regulator] Ofgem needs to deliver vigorous competition in the market,” Mr Scorer said, adding that customers should channel their anger into finding a cheaper provider.
Caroline Flint, Labour’s shadow Environment Secretary, attacked the group’s “profits on the back of spiralling bills for hard-pressed consumers”.
Centrica’s top executives fought back, claiming customer switching was now “stabilising” after it scaled back its price rise by 3.2 per cent last month following a shake-up of the government’s so-called green levies on bills.
Furthermore, Rick Haythornwaite, Centrica’s chairman, launched a tirade against Energy Secretary Ed Davey and Labour leader Ed Miliband for “immensely damaging” political interference in the energy market.
These interventions – chiefly Mr Miliband’s pledge last September to freeze energy bills for two years if elected prime minister and Mr Davey’s suggestion last week that British Gas could need to be broken up because of its large gas market share and high profit margins – increase the chance of “lights going out”, claimed Mr Haythornthwaite.
He said the damage was not only being done to Centrica - which has lost about a fifth, or £4bn of its value since Mr Miliband made his price freeze pledge – but to the country as a whole.
In what amounts to by far the strongest condemnation from any of the big six suppliers amid the mounting political engagement with the energy market, Mr Haythornthwaite said:“I think it [the current political debate] is immensely damaging, not just for Centrica, but for the nation.
"I think the reputation of Britain as a place in which to invest is under threat and the time to correct that is now, not after the 2015 election, by which time the possibility of the lights going out in Britain will be looming much larger,” Haythornthwaite said.
Mr Haythornthwaite admitted “there are issues around customers trust and service levels” at British Gas but insisted its reputation “in the eyes of our customers is vastly better than one would be led to believe from the media and political commentary.”
“And I don’t see this as the figment of a scaremonger’s imagination. I think right now we’ve got to restart collaborative dialogue around these key issues. We cannot afford to wait. Hostilities have got to cease,” he added.
Centrica’s chief executive, Sam Laidlaw, also weighed into the criticism of politicians, warning that “the prospect of political intervention and a wide range of potential policy initiatives has damaged investor confidence”.
“We firmly believe any form of price control in a competitive market is not the answer and is not in the best interests of customers..Such proposals create both short-term uncertainty for all energy suppliers and longer-term additional costs for customers.”
He cited the customer exodus as evidence that the market was working well and did not need to be overhauled.
The group also stressed the importance of British Gas Centrica remaining whole. “The benefit of integration is actually that because we have the size and scale that we have we are able to contract new supplies for the UK, we are able to shield our customers from very volatile commodity prices.”
“You have to be an integrated company if you’re going to be a sizeable retailer,” he added. He said Centrica would not have been able to sign £14bn of crucial new gas supply agreements for the UK, with Cheniere of the US and Qatar last year if the company had been broken up.
Centrica’s profit for last year came in at £2.7bn, a 2 per cent decrease on 2012, as the declining performance of British Gas hit the group’s bottom line.
Centrica’s revealed its customer exodus in the week after new figures showed that independent suppliers gained more than 700,000 customers from the big six in 2013 – and another 100,000 last month.
Also last week, Which? Revealed there had been 5.5m complaints against the big six last year.
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