One of the biggest energy suppliers in the UK has launched a new product designed to help them compete against new entrants to the marketplace. What is it, and will it work?
The giants of the energy supply sector were never going to sit on their hands and let smaller companies take away their business forever. British Gas and its parent company, Centrica, have taken the initiative to lure back some of those lost customers, as well as other customers of the so-called Big Six. It’s a new digital energy brand called British Gas X, promising to be cheaper, greener and simpler to use than anything else on the market today.
In this article, we’ll look at British Gas X in more detail. How does it work? Why is British Gas bringing it to market? Also, is the emergence of British Gas X an admittance that the smart meter rollout is dead in the water?
British Gas X
British Gas X is a new online-only energy brand, announced in mid-June 2020 by Centrica, the parent company of British Gas.
It aims to win new customers by excelling in three areas:
- Affordability – because British Gas X is online-only, overheads are lower and savings can be passed on to the customer
- Greener – British Gas X will match every customer’s energy consumption by feeding green energy (solar, wind, sea power) back into the grid
- Easier – Consumers can set up and manage their accounts online, sending in their own meter readings. Customer support will take place via webchat only (UK-based)
British Gas X will also allow customers to fix their energy prices for one year, after which they will be able to switch away with no exit fees, should they wish to.
To switch to British Gas X, customers must take gas and electricity from the brand. They must also pay by direct debit.
British Gas X is primarily aimed at customers who still have standard energy meters, rather than smart meters. Customers with smart meters can still register for the service, but they still have to supply their meter readings.
Why is Centrica doing this now?
There are several reasons why Centrica is introducing a product like British Gas X now, into the current marketplace.
While British Gas is still the UK’s largest energy supplier (a hangover from the days when it had a monopoly), it has not fared well in recent years. In February 2020, Centrica registered its largest 12-month loss since 2015, £849 million. It blamed the government’s energy price cap, as well as volatility in the natural gas market. As a result, Centrica lost its place in the FTSE 100 share price index. In June, before the unveiling of British Gas X, Centrica announced that it was eliminating 5,000 jobs as part of a corporate restructure. Three layers of management and 80 different employment contract types will go as part of this streamlining.
While blaming market volatility and the price cap is valid, Centrica also has to look at the number of customers it has lost. In 2019, 286,000 customers left British Gas to switch to other energy suppliers. Many of these customers will have gone to smaller, online-only, more nimble companies that can give the consumer what they want, whether that’s cheaper energy, greener fuel or better customer service. Announcing the new British Gas X brand is Centrica’s attempt to win them back.
It’s important to note that British Gas still plans to run its legacy brand alongside the new online challenger. The existing service will be promoted as a premium brand, available with add-ons such as boiler cover and home appliance care. Centrica will be hoping British Gas X does not cannibalise the customers it already has.
The meter conundrum
Although the news that British Gas X is aimed at customers with standard meters rather than smart meters was hidden at the bottom of the announcement, it is fascinating.
It is clear to everyone that the smart meter rollout has not gone to plan. The rollout is a long way behind its target, even before the Coronavirus lockdown slowed the pace of installations even more. It has cost a vast amount more than initially expected. Also, many consumers have found that smart meters do not bring the benefits they were hoping for.
Is British Gas X, where customers submit their meter readings manually, a return to basics? We’ve long been arguing that the smart meter rollout should be halted and that customers should get smart meters when their existing meters come to the end of their natural life, not before. Is the UK’s largest energy supplier coming round to our way of thinking?
Welcome to British Gas X
With dire financial results, customers deserting in droves and job losses on the horizon, it is clear that Centrica had to do something to initiate a change of fortune.
Will it work? Consumers love low prices, as well as the promise of greener energy. They value the security of being with a big name, with the peace of mind that they are not going to go out of business any time soon (as many small suppliers have). For these reasons, you can well imagine that British Gas X will be a success, especially if it has a large marketing budget allocated to promote it. On the other hand, the lack of customer service other than webchat could put off older or non-tech-savvy consumers.
All in all, it’s good to see innovation in the energy supply marketplace, particularly from one of the Big Six giants. We await news on how well it is received.