British Gas's parent company, Centrica, has today released its figures for 2011.

Image by everydaymodernlife via Flickr

British Gas’s parent company, Centrica reported operating profits of of £2.4 billion for 2011, up 1% on 2010. The residential arm of British Gas, meanwhile, saw a 30% fall in operating profits to £522 million.

But what about British Gas Business? Well, it accounted for 9% of Centrica’s overall profits last year, but profits fell to £219 million - a 6% decrease on 2010.

This decrease may have a lot to do with the fact that British Gas Business actually saw a drop in the number of businesses it supplies, from 1.4 million in 2010 to 1 million in 2011.

Why might British Gas Business be losing customers? Well, as the biggest supplier around, it will always have more customers to retain or lose than anyone else. It also has a smaller pool from which to draw new customers.

However, British Gas Business's prices have also been higher than average, as this chart showing the average prices our customers get from the company shows:

 

What about the issue of energy supplier profits as a whole? Working in the B2B sector, we want to see businesses do well and make a profit. However, transparency on profits is essential too, a fact recognised by Ofgem which led to the mandating of published accounts from the Big Six energy suppliers. These accounts aren't straightforward though; energy companies are 'vertically integrated', meaning they own both the generation and supply ends of the energy chain. So they can make money at one end even when the other side of the business reports hard times. That's the benefit from inheriting a former monopoly structure and acquiring and investing in that business. Should the banker bashing extend to the business energy market? We'll let you decide....

The Retail Market Review is Ofgem's investigation into the gas and electricity market for households and small businesses in Great Britain. As a result of the Review, Ofgem made a series of proposals for improvements to the way the business energy market works and it opened these proposals to feedback.

Naturally, I've sent my thoughts to Ofgem, and I thought I'd share them you too. It's a 41 page document - you can read it in full here or I've made a ten-point summary, if you don't have the time or inclination to read the whole thing. (I won't hold it against you!)

10 recommendations to improve the business energy market

1. Put the date the contract is due to end on all business energy invoices.  If businesses know when their contract is due to end, they'll known when to act, which will make the market more competitive.

2. Make all energy obligations universal for business customers. Business customer should get the same standards of service, whether they're dealing with an energy supplier, broker or anyone else they deal with in relation to their energy.

3. Extend SLC7A to all business customers. SLC7A is a licence condition, which says suppliers must give customers a clear contract in plain intelligible language, with full transparency on when that contract ends and what the customer needs to avoid being locked into another contract when the first one ends. Currently SLC7A only applies to microbusinesses, but we think it should be extended to all businesses, whether they're a small hairdresser, a large accountancy firm, or a huge chemical works.

4. Ban rollover contracts.  The practice of rolling customers over to a new contract is widespread, unfair and should come to an immediate end.

5. Introduce rules for how energy suppliers have to communicate with business customers.  Switching supplier can bring great benefits for businesses, but the process can be interrupted if suppliers misuse the 'objection window' (a period where an energy supplier can object to and temporarily stop the customer's switch from going through). We think there should be rules to dictate that if a supplier delays a transfer, they must contact the customer within 24 hours to give their reasons and explain what action the customer needs to take to get things back on track.

6. Make the registration and objection windows longer, to cut the impact on customers whose supplier has an issue with their switch. Following on from point five, we think contract start dates are often missed when there's an objection because a supplier hasn't told the customer what the issue is and what they can do about it, so we're also pressing for a longer window than the current 5 days, to give the transfer a better chance of success at the first attempt. 

7. Make information about commission available on request. We believe a business customer should have the right to request and to receive information about the commission paid by a supplier for 'acquiring' their contract, whether it was through a broker, a supplier call centre, a media campaign or any other method.

8. The implementation of a robust, enforceable and meaningful Standards of Conduct on all non-domestic customer interactions.  There should be Standards of Conduct to govern all interactions between suppliers, brokers and business customers, whether it's a sales conversation or a service conversation, to ensure that a business customer can expect to receive the same standards of service from their supplier, broker or any other person they interact with regarding their energy.

9. The implementation of a universally-applicable single, robust and enforceable Code of Practice. The regulator should also implement a single Code of Practice covering suppliers, brokers and any entity involved in the business energy contracting process, alongside the Standards of Conduct. This will require accreditation and performance monitoring. Failure to gain accreditation or to adhere to the rules should result in exclusion from the market.

10. The consideration of whether the best vehicle to deliver the intended aims is better served through a Supply Licence Condition or through a series of  individual actions. We think there should be a discussion about whether all of the above should be enshrined in a Supply Licence Condition which would mean if someone broke the rules, they could potentially be prevented from operating in the market.

For more information on business energy rules, regulators and schemes visit our partner company Business Juice. 

There’s not much time left to give your feedback on Ofgem’s Retail Market Review - the deadline is 15th February 2012.

Image by Claudio Schwarz via Flickr.

Ofgem is proposing changes to the business energy market in four main areas:

1. Protections for smaller business customers

Ofgem currently offers protection to microbusinesses, which are businesses that consume less than 200,000 kWh of gas or 55,000 kWh of electricity a year, or have fewer than ten employees and an annual turnover, or an annual turnover of €2m or less. It’s suggesting that these protections be extended to small businesses with less than 50 employees and an annual turnover of no more than  €10m. Find out more about the protections for microbusinesses. 

Ofgem is also proposing changes to rules about rollover contracts; currently a lot of businesses end up paying over the odds for their business energy because their energy supplier automatically extends their contract.

2. Objections to switching

Another issue businesses face (and which we frequently come across) is their current energy supplier objecting and holding up their switch. Ofgem thinks this process doesn’t work as well as it could and is proposing changes.

3. New accreditation scheme for third party intermediaries (TPIs) 

Ofgem is suggesting that there should be a new accreditation scheme for energy brokers and third party intermediaries. It is also asking the government for powers to regulate brokers and act on misselling.

4. Enhancing standards of conduct

Business energy suppliers currently have very few supply licence rules; Ofgem wants ‘stronger and broader’ standards of conduct to give businesses more confidence in their energy supplier. 

What's our take on these proposals? Well, we've blogged about this at length before, but in short we're in support of anything that Ofgem does to improve transparency and encourage a competitive market, but we think the Review is just the start of a much-needed overhaul.

For more information on business energy rules, regulators and schemes visit our partner company Business Juice.