British Gas seems finally to be on something of a roll. The company, which now claims to be the UK’s cheapest gas supplier after trimming retail prices this month, is tempting new customers and winning market share from its Big Six rivals.
The strength of the British Gas brand and the company’s hefty marketing spend during the downturn have no doubt helped.
But the strategy pursued by Centrica, its parent, of bundling gas and electricity supply together with home services, such as boiler, plumbing maintenance and appliance insurance products has also proved remarkably effective in drawing in new customers.
Now Sam Laidlaw, Centrica’s chief executive, is planning to open up a new front in the battle for customers by capitalising on government plans to improve home energy efficiency and to encourage so-called microgeneration of renewable energy, which will see households producing some of their own power from small-scale wind and solar generation.
He believes that by offering customers “home energy audits” and with the use of new technology such as smart meters, Centrica can build a whole new market installing and maintaining these sorts of products.
Meanwhile, two shrewd deals last year could mark a turning point for Centrica by permanently reshaping the business.
Historically, Centrica has suffered from a shortage of its own gas and electricity production. That has forced the company to buy supplies on the open market, leaving it exposed to volatile wholesale prices.
The £1.3 billion purchase of Venture Production, a North Sea gas producer, and a 20 per cent stake in British Energy, the UK nuclear generator, from EDF for £2.3 billion, have helped to solve this problem.
Centrica is now more vertically integrated and more independent than it has been since its creation in 1997 after a demerger from the old British Gas.
Consumers may not appreciate the need for this investment by Centrica as British Gas announce today a jump of 58% in profit for 2009 to a record high of £595 million.