British Gas chairman in blackout warning

Rick Haythornthwaite, Centrica’s newly appointed chairman, says the threat of power blackouts in the UK is no longer the “figment of a scaremonger’s imagination”.

The Centrica chief warned that the intense political debate over gas and electricity prices risks “the lights going out” in Britain. Meanwhile the company’s chief executive Sam Laidlaw says the company will find it difficult to invest in power generation projects until there is a stable policy framework in place, most likely after the next general election.
Sam Laidlaw
Centrica is currently undergoing a torrid time and has just announced a 6 per cent drop in profits. The company’s chairman told the 3Nexus newscast service that opposition leader Ed Miliband’s pledge to freeze energy prices if he wins the 2015 election and energy secretary Ed Davey‘s suggestion that Centrica should be broken up had damaged the company and the country’s reputation among global investors.

“I think the reputation of Britain as a place in which to invest is under threat and the time to correct that is now, not after the 2015 election, by which time the possibility of the lights going out in Britain will be looming much larger,” he said adding that British Gas’s fortunes “were inextricably linked to the fortunes of our nation.”

“And I don’t see this as the figment of a scaremonger’s imagination. I think right now we’ve got to restart collaborative, constructive dialogue around these key issues; we cannot afford to wait, hostilities have got to cease.”

Mr Haythornthwaite has been in his role for seven weeks and said that his recent activities have included conferring with all stakeholders, customers groups, regulators and everyone with a view on the sector on the major themes; “energy security, affordability and decarbonisation. These are too important to sit in a world of polarisation and cold-shouldering.”

Haythornthwaite’s warning came as British Gas admitted it had lost 462,000 customers since January 2012, including 100,000 in the past seven weeks. The exodus of customers, higher costs and warmer weather dragged British Gas’s annual profits down 6% to à‚£571m.

Mr Miliband promised last September to freeze residential energy prices for 20 months if Labour was elected to government in 2015.

Sam Laidlaw, Centrica’s chief executive, said Miliband’s pledge was not credible. “We firmly believe that any form of price control in a competitive market is not the answer and is not in the best interests of customers, and this has been clearly demonstrated by experience in other markets. Such proposals create both short-term uncertainty for all energy suppliers and longer-term additional costs for customers.”

“Obviously we would like to invest in power generation if there was a stable policy framework but clearly now there is a lot of uncertainty about power investment. We had hopes in 2013 of developing the Race Bank offshore wind project but when it didn’t qualify were obliged to sell to someone else. We will also continue to look at power investment if we can find a stable framework, which does require a political consensus, which isn’t there at the moment and may not be there until after the election.”

As regards Mr Davey’s call for the business to be broken up, Mr Laidlaw said there it would critically damage the company’s scope to invest.

“If we were broken up into smaller companies, we wouldn’t be able to undertake the scale of activity,” he said.

Mr Laidlaw referred to the low carbon emitting qualities of his company’s gas-fired power fleet but said the market as it currently stood did not favour such power generation. “Gas fired is loss making at the moment. We need a mechanism in place to actually incentivise construction of new gas-fired generation. That is the capacity payment mechanism which the government hopes to launch later this year for 2018 and 19. If that is a success it enables us to restart investing in gas-fired generation.”

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