The £3 million-a-year head of the UK’s biggest energy supplier (which owns the Scottish Gas and British Gas brands) has warned the prime minister against making his company a scapegoat for the perceived failures of business
Iain Conn, Chief Executive, Centrica plc, said Theresa May was right to focus on the problems of “people left behind by globalisation”. But he said the Big Six energy companies are the wrong target for a threatened clampdown on market failures.
May told the Conservative party conference in Birmingham that “where markets are dysfunctional” she was prepared to intervene, citing as an example the “two-thirds of energy customers stuck on the most expensive tariffs”. This fuelled speculation the prime minister is considering energy price caps of the kind once proposed by the Labour Party.
The Competition and Markets Authority last June proposed a limited cap on prepayment meters — typically used by the poorest and most vulnerable consumers — after a two-year investigation into alleged overcharging. But the regulator ultimately stopped short of market-wide price controls.
Conn said the CMA’s proposals, which included a range of measures aimed at encouraging consumers to shop around, should be given a chance to work.
He said: “There is a lot going right in this market. It is one of the most competitive markets in the world and it is becoming more so. Before we jump to conclusions about more regulation being necessary, we should give the momentum from the CMA a bit of time to work through.”
Centrica is “facing massive competition and huge pressure on margins” from more than 40 rival operators, he said, adding that the intensity of the competition helped to explain why his company was in the process of cutting 3,000 jobs to save costs.
Critics of Centrica and the other “big six” suppliers — EON, Npower, EDF, Scottish Power and SSE — say tougher intervention is needed to protect consumers on standard rates who can end up paying £300 a year more than those on cheaper deals.
Consumer advocates say a two-speed market has developed, with about a third of consumers shopping around and two-thirds remaining, either through inertia or ignorance, on typically more expensive floating rates.
The CMA proposals also included creation of a database of customers on standard tariffs who could be targeted by marketing for cheaper deals. Critics said this risked bombarding people with junk mail.
Speculation about additional Downing Street intervention has focused on three potential measures: an extension of the price cap on prepayment meters to other vulnerable groups; automatic switching of people to cheaper rates if they remain on standard tariffs for a certain period; or a limit on the tariff increase allowed when a fixed-price contract expires.
Conn, who faced an investor revolt this year over his £3 million pay package, said big companies must work with government and civil society to address the populist political impulses exposed by the British Independence vote to leave the EU-bloc.
About 15% of Centrica shareholders voted against Conn’s pay deal at the company’s annual meeting in April. He said it was up to Centrica’s remuneration committee to set pay.