Supplementary written evidence submitted by Centrica plc (WIN0057)
Thank you for your time on Wednesday, I hope you found the evidence provided helpful for your Committee’s inquiry into winter readiness. Following the session, please find below additional evidence on a number of points raised.
During the session, I committed to provide further information regarding Centrica’s price to earnings (P/E) ratio.
To encourage investment in the UK, we need a stable policy framework and consistent tax regime. As a company, we are committed to investment in the UK and have made a number of recent investments to help secure energy for our UK customers and deliver our net zero ambitions, this includes a recent $8bn deal with Norwegian Company, Equinor to increase gas supplies over the coming winters.
Centrica’s current 12-month forward P/E ratio is 9. We also looked at available share price and projected earnings data for our peers to see how this compares. Per Bloomberg data, companies classified as utility companies in the UK have an average P/E ratio of 14 and companies classified as utility companies in the United States have an average P/E of 17.
I also committed to follow up on a range of questions relating to Ofgem’s proposed Consumer Standards, which are currently in consultation phase. Ofgem are due to finalise the proposals by October and they are expected to be in force by December 2023.
Centrica has invested significant amounts in customer service during the energy crisis. We hired an additional 800 agents last year to help us manage winter demand and we are recruiting a further 800. All our agents receive 8 weeks of training, and they will then receive continuous training and refreshers throughout their tenure. By way of example, we have recently enhanced training around ability to pay, to ensure our agents have the rights skills and tools to help customers who are struggling with their bills. We are also rolling out MIND mental health training to help agents identify and support mental health vulnerabilities.
Centrica’s current telephone opening hours are 9am – 5pm Monday to Friday, but we also have an emergency 24 hour line for prepayment meter customers who are off-supply. If, for any reason, an issue cannot be resolved remotely, we will send an out of hours engineer. We are a unionised workforce and we are currently discussing with trade unions extending our core hours in line with Ofgem’s proposal.
We also provide support to those who are digitally excluded. We have a broad range of digital and non-digital accessibility options for customers and work closely with charity and commercial partners to offer bespoke support. Through the independent British Gas Energy Trust, we fund 196 specialist frontline advisors who help customers with a range of services, including online support. We also use alternative channels, such as WhatsApp and we are constantly striving to improve our service offering. By way of example, by the end of this year we hope to launch Language Line to support customers whose first language is not English.
Support for struggling customers
Finally, in the context of Ofgem’s proposed Consumer Standards, I was asked to provide details of expanded and more effective support we are providing for customers who are struggling with their bills.
As highlighted above, these standards are not yet in force, but despite this, our focus over the energy crisis has been on increasing our support for customers and particularly those who are most vulnerable and hardest to reach.
We have committed 10% of our British Gas Energy profits to supporting customers, until the energy crisis ends. So far, we have committed £100m in support, including via direct grants to credit customers, prepayment meter customers and small businesses. This is beyond what we are required to do by regulation. We have helped nearly 20,000 households with direct grants of up to £2,000 and through our small business fund, over 6000 SMEs have been supported. In addition, the frontline agents the British Gas Energy Trust funds have helped manage £17 million of debt and have written off debts worth over £5 million. See appendix for case studies of customers supported through the energy crisis.
We also provide funding for charity organisations, such as StepChange and Scope and we work closely with these organisations, leveraging their expertise to help support customers with individual needs. We also have dedicated channels for charity organisations, such as Macmillan and StepChange, to contact specialist teams directly. This year we have also provided additional help in the community with our Post Office pop-ups, where customers can access face-to-face advice.
There were several mentions throughout the session on smart metering and Ofgem’s proposals on financial resilience. On smart metering, we strongly believe the smart metering policy framework needs reviewing, with a move towards a mandatory rollout, with broader incentives and public awareness to overcome the real-world obstacles facing the smart meter roll-out. Without this, industry and Ofgem are likely to remain stuck in an annual cycle of seeking to investigate why more meters were not installed and consumers will be stuck with outdated technology, which in the case of prepayment meter customers can act as a barrier to providing timely support.
Turning to financial resilience, consumers have been hard hit by the distributed cost of supplier failures over recent years and we believe Ofgem’s decision not to require all suppliers to ring-fence the credit balances of their customers is a mistake. Ofgem’s initial position had been, rightly, that the use of customers’ monies to fund working capital by energy suppliers is akin to using “interest free company credit cards”. To now only potentially require that suppliers ringfence their customers’ credit balances when the supplier is in financial difficulty does not appear to be in the interests of consumers. We have called for customer credit balances to fully ringfenced – a practice already undertaken by Centrica today.
If you require any further information on these or other topics, please do not hesitate to contact me.
Group Chief Executive
Aaron, British Gas customer from West Yorkshire (received a grant through the British Gas Support Fund): Aaron heard about the British Gas Energy Trust through people he knew and contacted them after he started to build up energy debts. He was granted £858 to pay off the debts. Customer feedback was: “The form was one of the easiest I have filled in. With my mental health, it can be difficult to read questions properly and know I have answered them correctly, but this was simple.” He also commented “Not having the debt allowed me to start again. I can organise my money to pay everything and never get into debt again.”
Coffee shop based in Westcliffe-on-Sea (received a grant through the British Gas Small Business Support Fund): Customer on Fixed DD and underpaying since 2020 due to Covid impact. Energy support fund of £2.3k applied covering 50% of the outstanding balance in March 2023. The customer setup a payment scheme which is now covering ongoing consumption and clearing the remaining balance. Customer feedback was: “It was a great help to see the balanced halved and I was able to catch up with payments going forward.”