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Ian Peters, MD British Gas, speaks at Market Force "Future of Utilities" conference #Utilities15

I've been invited today to give the industry response to Dermot’s speech on ‘making energy markets work for consumers and industry’.

Many of the points Dermot raised Iagree with. Individually, and together as an ‘industry’, we do need to work harder to get the basics right on customer service. We do need to improve how we resolve complaints. We do need to do a better job at explaining price changes, up and down; both the amount and the timings. And the way we look out for, and care for, our most vulnerable customers needs to be more consistent. At British Gas, we’re moving to measuring what we do in terms of customer outcomes, not process metrics – that’s something we’ve learnt from the part of our business that’s overseen by the FCA with is further ahead on principles-based regulation.

We also need to continue going beyond the basics, to deliver a truly competitive market full of choice to meet different customer expectations. But, while other suppliers may think differently, my view is that price is not the only way to compete.

For many customers in the UK, value is about more than just price. Look at high street banking as an example: most people aren’t simply comparing banks on interest rates alone. Instead, they’re making decisions based on such things as whether the bank is open on the weekends, because that’s when they’re free to do their banking; or who has the widest variety of mortgage products, because they want to be able to stay with the same bank but switch deals; or who will still send them a cheque book as standard, because that’s how they choose to manage their money. This sort of choice – in any industry – is the most powerful thing we can give our customers. It’s what they tell us they want. If they see that competition, and we’re transparent in our offers, they feel empowered.

In a competitive market - which I believe this one is - the strategy of differentiating on more than just price will continue to produce a greater variety in what’s on offer. But we sometimes encounter blocks to this, that don’t help customers. It wasn’t Dermot, but one of his predecessors, who once took my breath away with the following, quote: ‘Part of the problem with customer trust is that energy suppliers do things differently.’

I couldn’t disagree more that doing things differently is a problem! The more ‘different’ we are, by offering the range of products and services our customers ask for, the greater competition is. But we need to do this within sensible limits to avoid confusion. People are more likely to trust an industry they see is working in their best interests. So as I respond to Dermot’s points, I’m going to underline how increasingly different we suppliers are to each other, and why that’s a great thing for our customers. Why, in fact, strong differentiation is a legitimate basis of competition in retail energy.

To do that, I want to describe the industry of today as I see it.

The pace of change we’ve experienced in this industry since 2012 is greater than at any time in history, or certainly in my ten years in it. And it’s still accelerating.

Because of that, we’re an industry increasingly characterised by differentiation. In a short time, it’ll become harder to refer to us simplistically as one homogenous entity, the ‘energy industry’. I’d suggest, instead, that what we’re each doing differently to win and retain customers in a competitive market will define us more than the things we have in common as energy suppliers.

In residential energy there are now 26 suppliers, ranging from British Gas to Gurkha Energy. We’re fighting tooth and nail for business across a widening array of channels, including collective switching -- which can see tens of thousands of customers change suppliers in one fell swoop.

Not only are we offering our customers an extensive variety of products and services, but there’s also a wide choice in how they’re delivered.

And here's a few examples:
Customers have told us they want choice in energy tariffs. So there’s a supplier for you, whether you want a fixed price deal, or a variable one. EDF has a price promise to let customers know if there’s a deal elsewhere that’s cheaper by a pound a week. We have one which is fixed, but falls if our variable rate falls, as happened in February. And we’re trialling the UK’s first tariff that gives you free electricity on Saturdays or Sundays.

Customers expect to deal with their energy supplier on their terms, and at a time that suits them. Maybe you only want to deal with your energy supplier online, and hate the thought of paper bills. Or you want to get your bills by post, and talk through tyour ariff options with a person at the end of the line. Perhaps you want to get a bill that’s puzzled you looked at via Twitter. There’s a supplier with the right customer service for you in all these instances.

We differentiate from each other through the range of products and services we offer. Go to one of the new entrants if you just want your lights to switch on; but perhaps think about Flow Energy if you’re after a new type of boiler that generates electricity.

Suppliers also differ in where we get our energy from. For instance, a customer can look at Ecotricity’s business model of turning profit from energy bills into windmills to fund new sources of green energy. Or Good Energy’s electricity from ‘Cornish sunshine, Scottish wind, and Welsh rain.’ Or if they want to join forces with the neighbours to get their energy produced locally, they can consider one of the new community energy schemes on offer – Ovo’s a pioneer in this space. Many suppliers also support onsite energy generation: we’re working with Sainsbury’s, by providing ground source heat pumps so they can save money on heating costs.

We also differ in the tools we give to customers to help them understand and measure the energy they’re using. Many of us now offer free apps to make it easy to manage accounts, to monitor energy use over time, and to compare use with the neighbours.

And it’s worth considering who are the first suppliers leading the charge on providing smart meters to get rid of estimated bills – the single biggest bugbear for customers – and letting those customers see their energy in pounds and pence as they use it: the first movers here are E.On, First Utility, and ourselves at British Gas – that's quite a diverse group. We’re in that group together not as a function of size, not because we’re all big suppliers (we aren’t)... but because we’ve each separately decided on some form of early strategy for smart metering, to get those benefits to our customers and help them reduce their consumption as quickly as possible and therefore improve our competitive position. Some day soon, smart meters will also enable customers to switch within a few hours, something we embrace as further sharpening competition.

Some suppliers are going further, not stopping at differentiating from others in the energy industry, but taking their competition for customers beyond that boundary. For example, at British Gas, we recently made a serious move to challenge global technology companies like Google, by making the internet of things a reality for homes across the globe. We’ve bought the technology company AlertMe to add to the British Gas team, to build on our successful Hive Active Heating remote heating and hot water product. Watch this space for new products and services that help people to manage their homes – and that’s important: homes, not just their energy – more simply and more conveniently. A lot will be happening later this year. When added together, this is all about putting easily accessible data into our customers’ hands. It’s about giving them informed choice and control, empowering them.

Innovation, and the prize of delivering the connected home, mean the energy industry will continue to change rapidly, in the years to come. Our relationship with customers won’t just depend on confidence that the TV will switch on and that the gas is cooking their dinner... there’ll be more power in the customer’s hands. They’ll be able to choose to use energy when it’s cheaper, through time-of-use tariffs. Where they have smart appliances that can recognise the ideal time to switch on, they’ll be able to control those remotely through a smartphone app. This is a reality that’s just around the next corner. And this is what I mean by the pace of change continuing to accelerate.

Such differentiation isn’t just apparent in the household energy market: you see it in the B2B market, too. There, some 35 companies are vying for customers. Some provide just energy, and some offer services too. Some enable their customers to trade energy on the open market, or to buy direct from power plants. One of the things we’re prioritising at British Gas is focusing on how we can improve their energy performance. For instance, we’ve made a bold commitment to save St George’s hospital in Tooting more than a million pounds a year over the next fifteen years through improved energy efficiency.

So the point is: not all customers want the same thing. They want Choice. They want competition. They want innovation. They want value for money.

Customer demand and expectation is creating a real head of steam in each of these areas. Competition is responding to those changing demands. You can feel it happening. That momentum is stimulating greater differentiation. We’re in an unusual phase in the volatile commodity market, due to the unprecedented scale and pace of commodity falls, and this is a time of disruptive challenge to the entire energy industry. It requires all companies to adapt or, frankly, to risk not surviving.

The big players and the smaller players are all challenged, and they’re responding differently. I hope I’ve shown you that there’s increasing variety in the ways suppliers are responding. And that it’s all happening at increasingly breakneck speed.

I’ll close with two calls.

First, to suppliers: let’s set out our stalls and communicate clearly to customers what we separately stand for, so it’s easy for them to make a choice based on differentiation. And we must underpin that by delivering consistently good service and better communications. We need to hear not that energy suppliers are ‘all the same as each other’, but that customers are deriving real value from how different we are. That’s the only way we energy companies will earn the right not to be lumped together as the ‘Big Six’, the ‘Intermediate Four’, or the ‘challenger brands’, or even the ‘energy industry’. It’s the products and services we offer. And, importantly, it’s our behaviour that makes the difference.

Second, to those who set the political and regulatory context we operate in, a plea: please continue to look beyond price as the only yardstick of value. Avoid the risk that through multiple interventions, we end up homogenising the customer offering, and so constraining choice. Above all, do ignore that voice from the past, complaining about energy companies “all doing things differently”. Instead, cherish differentiation and innovation – it was forged by customer demand; and it is a worthy basis of competition in this hard-fought marketplace.

Notes to editors

Ian Peters spoke at Market Force's Future Of Utilities conference, held on 26th March 2015.

The event addresses how companies can respond to the challenges they face, from driving bills down and service up, to ensuring continued infrastructure development.

For more information, please visit Market Force's website or follow the conference live on Twitter using #Utilities15

For more information contact:

British Gas Press Office
British Gas
0800 107 7015
media@britishgas.co.uk

British Gas is Britain’s leading energy supplier, and serves around 11 million homes in Britain – nearly half the country’s homes – as well as providing energy to around half a million British businesses. British Gas provides value for money, dedicated customer service, innovative energy solutions and the highest quality Homes Services expertise in the country. Find out more at www.britishgas.co.uk.


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