Centrica
Encyclopedia
Centrica plc is a multinational utility company, based in the United Kingdom but also with interests in North America. Centrica is the largest supplier of gas to domestic customers in the UK, and one of the largest suppliers of electricity, operating under the trading names "Scottish Gas" in Scotland and "British Gas" in the rest of the UK. It is listed on the London Stock Exchange
and is a constituent of the FTSE 100 Index
.
demerged on 17 February 1997 to form two separate companies: Centrica plc and BG plc.
Centrica took over gas sales and gas trading, services and retail businesses, together with the gas production operations in the North and South Morecambe gas fields.
BG plc was renamed BG Group plc in December 1999. BG Group plc uses the British Gas name overseas but it is a separate company to Centrica and has no involvement with the British Gas retail brand in the UK
In 1998, Centrica’s supplier monopoly for gas came to an end. Centrica maintained the British Gas retail brand but is only allowed to use this brand name in the UK. The electricity market also opened up to competition and, through the British Gas brand, the company started supplying its first domestic electricity customers.
for £1.1 billion. In 2000 Centrica further diversified with the opportunistic purchase of OneTel in the UK, a residential telecoms operator. Soon afterwards Centrica also bought the Dyno franchise group (best known for its Dyno-Rod drains unblocking service).
In September 2008 the Company acquired the Caythorpe gas-producing field near Bridlington
to use for storage purposes. It also agreed to buy 20% of British Energy
from EDF
, financing this with a £2.2 billion, 3 for 8 rights issue
.
The rights issue offered shares at 160 pence per share and closed on 12 December 2008.
In August 2009, Centrica took over Venture Production
, a North Sea gas producer.
On 17 November 2010, the Company acquired the assets of heat pump installation company Cool Planet Technologies Ltd. for GBP0.5 million in cash. This will give a boost to company’s strategy of developing a broad range of low carbon technologies and advice.
In November 2011, Centrica agreed to buy $1.6 billion stakes of 8 fields on the Norwegian continental shelf from Statoil
ASA. In a second deal, Centrica agreed to buy 5 billion cubic meters a year gas from the same company from 2015 to 2025 as equal to 5 percent of U.K. gas consumption.
and British Permira
for £1.75 billion. Then in 2005 Centrica sold their OneTel business to Carphone Warehouse.
was seeking a takeover of Centrica. This created controversy in the media, while the Department for Trade and Industry stated any deal would be subject to "intense scrutiny". Tony Blair announced in April that he would not block any potential deal. Although rumours have persisted periodically from 2006–2009, to date no deal has emerged.
is one of North America's largest energy and energy-related services providers with more than 5 million residential and commercial customer relationships.
Centrica plc, trading as British Gas (and as Scottish Gas in Scotland) is market leader in the supply of energy to UK households. In recent years the UK wholesale energy market
has become more volatile, leading to increasing energy prices. Consequently the core residential energy business of British Gas has been running at a loss according to results released by parent, Centrica plc.
British Gas supplies gas and electricity to over 20 million customers in the UK. Direct Energy has more than 5 million residential and commercial customer relationships.
Centrica does not own or operate any of the gas transmission or electricity distribution networks in the UK.
By early 2007 market reports suggested that UK wholesale energy prices had stabilised and started to fall. In March 2007 British Gas (and Scottish Gas) implemented the first price reductions in the UK residential energy market for six years, a move followed by other major energy suppliers. In late April 2007 British Gas again reduced prices, highlighting that some competitors had yet to reduce prices in 2007. Having suffered heavy losses of customers as prices were rising, British Gas claimed that the new environment of falling prices would allow them to grow their customer base.
from EDF Energy
. The company now produces 14.3% of its electricity from nuclear (the second highest rate in the UK), helping it to achieve the lowest carbon emissions of the major providers. Centrica has also acquired an option to purchase a 20% stake in EDF's subsidiary, NNB Generation Company
(NNB GenCo). NNB GenCo is planning to build an additional 6.4GW of nuclear capacity in the UK.
Centrica has also submitted applications for consent for two offshore wind farms, Docking Shoal and Race Bank, totalling 1160MW. Subject to approval and construction, by the middle of the next decade these three projects, together with existing operational wind assets, would give Centrica more than 1.75GW of generating capacity in the UK, capable of meeting the annual needs of more than 1.2m homes.
receives an annual compensation of £1,535,000. This total consists of £906,000 salary and a £629,000 bonus.
Following this adjudication, British Gas signed up to Ofgem's Green Supply Guidelines which aim to give an objective interpretation of 'green tariffs' and raise the standard of industry products. British Gas supported the stipulation that a green tariff must deliver an additional environmental benefit and not simply charge a premium for renewable electricity that would have been generated anyway under the Renewables Obligation. The company continues to offer Zero Carbon which is based on this principle of additionality.
for failing to deal properly with customer complaints. After a year-long investigation into the British Gas, Ofgem found it had breached regulations on how energy companies should handle disputes. Ofgem found that British Gas failed to re-open complaints from customers who indicated they felt the matter was not resolved adequately, failed to provide sufficient information to complainants about the energy ombudsman service, and failed to deal properly with complaints from micro-businesses because it had not implement the necessary processes and practices.
A spokesperson for British Gas said the company felt that finding it in breach of rules for failing to provide adequate information to consumers about the energy ombudsman was "disproportionate to the mistake".
British Gas Business was fined £1m in July after Ofgem's investigation found the company had misreported the amount of electricity supplied under the British government's renewables obligation. British Gas claims it spotted the problem – it said an over-reporting of the amount of renewable energy it was supplying caused by human error – and notified the regulator.
London Stock Exchange
The London Stock Exchange is a stock exchange located in the City of London within the United Kingdom. , the Exchange had a market capitalisation of US$3.7495 trillion, making it the fourth-largest stock exchange in the world by this measurement...
and is a constituent of the FTSE 100 Index
FTSE 100 Index
The FTSE 100 Index, also called FTSE 100, FTSE, or, informally, the footsie , is a share index of the 100 most highly capitalised UK companies listed on the London Stock Exchange....
.
Demerger of British Gas
British Gas plcBritish Gas plc
British Gas plc was formerly the monopoly gas supplier and is a private sector in the United Kingdom.- History :In the early 1900s the gas market in the United Kingdom was mainly run by county councils and small private firms...
demerged on 17 February 1997 to form two separate companies: Centrica plc and BG plc.
Centrica took over gas sales and gas trading, services and retail businesses, together with the gas production operations in the North and South Morecambe gas fields.
BG plc was renamed BG Group plc in December 1999. BG Group plc uses the British Gas name overseas but it is a separate company to Centrica and has no involvement with the British Gas retail brand in the UK
In 1998, Centrica’s supplier monopoly for gas came to an end. Centrica maintained the British Gas retail brand but is only allowed to use this brand name in the UK. The electricity market also opened up to competition and, through the British Gas brand, the company started supplying its first domestic electricity customers.
Acquisitions
In late 1998, under CEO Sir Roy Gardner and Finance Director Mark Clare, Centrica attempted to diversify – firstly by developing the Goldfish credit card, then in 1999 by acquiring the AAThe Automobile Association
The Automobile Association , a British motoring association founded in 1905 was demutualised in 1999 to become a private limited company which currently provides car insurance, driving lessons, breakdown cover, loans and motoring advice, and other services...
for £1.1 billion. In 2000 Centrica further diversified with the opportunistic purchase of OneTel in the UK, a residential telecoms operator. Soon afterwards Centrica also bought the Dyno franchise group (best known for its Dyno-Rod drains unblocking service).
In September 2008 the Company acquired the Caythorpe gas-producing field near Bridlington
Bridlington
Bridlington is a seaside resort, minor sea fishing port and civil parish on the Holderness Coast of the North Sea, in the East Riding of Yorkshire, England. It has a static population of over 33,000, which rises considerably during the tourist season...
to use for storage purposes. It also agreed to buy 20% of British Energy
British Energy
British Energy was the UK's largest electricity generation company by volume, before being taken over by Électricité de France in 2009. British Energy operated eight former UK state-owned nuclear power stations and one coal fired power station....
from EDF
EDF Energy
EDF Energy is an integrated energy company in the United Kingdom, with operations spanning electricity generation and the sale of gas and electricity to homes and businesses throughout the United Kingdom...
, financing this with a £2.2 billion, 3 for 8 rights issue
Rights issue
A rights issue is an issue of additional shares by a company to raise capital under a seasoned equity offering. The rights issue is a special form of shelf offering or shelf registration. With the issued rights, existing shareholders have the privilege to buy a specified number of new shares from...
.
The rights issue offered shares at 160 pence per share and closed on 12 December 2008.
In August 2009, Centrica took over Venture Production
Venture Production
Venture Production ltd was a leading British-based oil and gas exploration and production business. Its activities were focused on the North Sea...
, a North Sea gas producer.
On 17 November 2010, the Company acquired the assets of heat pump installation company Cool Planet Technologies Ltd. for GBP0.5 million in cash. This will give a boost to company’s strategy of developing a broad range of low carbon technologies and advice.
In November 2011, Centrica agreed to buy $1.6 billion stakes of 8 fields on the Norwegian continental shelf from Statoil
Statoil
Statoil ASA is a Norwegian petroleum company established in 1972. It merged with Norsk Hydro in 2007 and was known as StatoilHydro until 2009, when the name was changed back to Statoil ASA. The brand Statoil was retained as a chain of fuel stations owned by StatoilHydro...
ASA. In a second deal, Centrica agreed to buy 5 billion cubic meters a year gas from the same company from 2015 to 2025 as equal to 5 percent of U.K. gas consumption.
Asset selling
This strategy of diversification changed in mid 2003, possibly under pressure from major city shareholders to deliver better returns and/or possibly anticipating pressure on the core UK energy supply business. The change of strategy started with the sale of the Goldfish business to Lloyds TSB Bank (who subsequently sold it to Morgan Stanley Bank International Limited). Then in 2004 Centrica sold the AA to two private equity firms; Luxembourgish CVCCVC Capital Partners
CVC Capital Partners is one of the top five largest private equity firms globally with approximately US$46 billion in funds focused on management buyouts...
and British Permira
Permira
Permira is a United Kingdom-based private equity firm with global reach. The firm advises funds with a total committed capital of approximately €20 billion....
for £1.75 billion. Then in 2005 Centrica sold their OneTel business to Carphone Warehouse.
Consolidation
Since 2005 Centrica has declared a strategy of consolidating within the energy sector, upstream and downstream, including expanding operations overseas. New Chairman Roger Carr replaced retiring chairman Sir Michael Perry in 2005, whilst new CEO Sam Laidlaw picked up the reins from retiring CEO Sir Roy Gardner in 2006. Sam Laidlaw brought significant experience of 'upstream' operations, securing supplies of energy which can then be sold on through Centrica's consumer business.Dealings with Gazprom
In January 2006, it was rumoured that the Russian state-owned utility company GazpromGazprom
Open Joint Stock Company Gazprom is the largest extractor of natural gas in the world and the largest Russian company. Its headquarters are in Cheryomushki District, South-Western Administrative Okrug, Moscow...
was seeking a takeover of Centrica. This created controversy in the media, while the Department for Trade and Industry stated any deal would be subject to "intense scrutiny". Tony Blair announced in April that he would not block any potential deal. Although rumours have persisted periodically from 2006–2009, to date no deal has emerged.
Operations
Centrica’s operations are now mainly focused in the UK and North America, having announced in 2009 that it would be selling its European business interests. However, Centrica Energy also operates in Norway (gas exploration and production), Germany (trading) and Nigeria (gas exploration). British Gas has some back office functions located in India and South Africa.British Gas
British Gas supplies gas and electricity to UK residential and business customers, providing central heating and gas appliance installation and maintenance and low-carbon and energy efficient products and services.Direct Energy
Direct EnergyDirect Energy
Direct Energy is a North American retailer of energy and energy services. The company was founded in 1986. With over six million customer relationships in Canada and the United States, it is the largest energy and home services retailer in North America. The current President and Chief Executive...
is one of North America's largest energy and energy-related services providers with more than 5 million residential and commercial customer relationships.
Centrica Energy
Centrica Energy sources gas and electricity from Centrica’s own production and third parties to supply residential and industrial customers in Great Britain and continental Europe.Centrica Storage
Centric Storage is the UK’s largest gas storage company. It operates the Rough gas storage facility which provides approximately 70% of current UK storage capacity.Continental Europe
- OxxioOxxioOxxio is a Dutch utility that serves about 800,000 customers for electricity and natural gas. In the Dutch market, Oxxio is the fourth largest supplier and the largest of the companies that entered the market since liberalisation of the energy market began in 2000. In 2005 British Centrica bought...
(Netherlands) - Luseo Energia (Spain)
- Centrica Energie GmbH (Germany)
- Centrica Energi (Norway)
North America
- Direct EnergyDirect EnergyDirect Energy is a North American retailer of energy and energy services. The company was founded in 1986. With over six million customer relationships in Canada and the United States, it is the largest energy and home services retailer in North America. The current President and Chief Executive...
- Direct Energy Business Services
- WTU Retail Energy
- CPL Retail Energy
United Kingdom
- Centrica Energy
- Gas fields
- Power stations
- British Gas Services
- Dyno-Rod
- British Gas Residential
- British Gas (England & Wales)
- Nwy Prydain (Wales)
- Scottish Gas
- British Gas Business
- Energy360
- Centrica Storage
- Rough gas storage facility
- Newfield Exploration UK
Gas and electricity supply
Energy market
Energy markets are those commodities markets that deal specifically with the trade and supply of energy. Energy market may refer to an electricity market, but can also refer to other sources of energy...
has become more volatile, leading to increasing energy prices. Consequently the core residential energy business of British Gas has been running at a loss according to results released by parent, Centrica plc.
British Gas supplies gas and electricity to over 20 million customers in the UK. Direct Energy has more than 5 million residential and commercial customer relationships.
Centrica does not own or operate any of the gas transmission or electricity distribution networks in the UK.
Energy assets
To help to manage price volatility, Centrica announced a variety of investments in new sources of supply that may help wholesale prices to come down in the future. During 2005, the company estimated that nearly £600 million was spent on new gas, power and renewable energy assets, with a further £400 million committed to help import more gas into the country. Since 40% of electricity is generated by gas-powered stations, this investment was predicted to reduce the cost of electricity. In parallel, British Gas announced in July 2006 that they intend to improve customer service.By early 2007 market reports suggested that UK wholesale energy prices had stabilised and started to fall. In March 2007 British Gas (and Scottish Gas) implemented the first price reductions in the UK residential energy market for six years, a move followed by other major energy suppliers. In late April 2007 British Gas again reduced prices, highlighting that some competitors had yet to reduce prices in 2007. Having suffered heavy losses of customers as prices were rising, British Gas claimed that the new environment of falling prices would allow them to grow their customer base.
Gas-fired power stations
Centrica currently operates eight gas-fired power stations in the UK:- Barry
- Glanford Brigg
- Killingholme
- King's Lynn
- Langage (885MW)
- Peterborough
- Roosecote
- South Humber Bank
Microgeneration
Centrica has secured acquisitions and exclusive access and distribution agreements in microgeneration technologies to build a varied portfolio of low carbon products and services. This includes Solar Technologies, Semplice Energy Ltd and interests in Ceres Power Holdings plc and Econergy.Nuclear power
In 2009, Centrica purchased a 20% stake in nuclear power generator British EnergyBritish Energy
British Energy was the UK's largest electricity generation company by volume, before being taken over by Électricité de France in 2009. British Energy operated eight former UK state-owned nuclear power stations and one coal fired power station....
from EDF Energy
EDF Energy
EDF Energy is an integrated energy company in the United Kingdom, with operations spanning electricity generation and the sale of gas and electricity to homes and businesses throughout the United Kingdom...
. The company now produces 14.3% of its electricity from nuclear (the second highest rate in the UK), helping it to achieve the lowest carbon emissions of the major providers. Centrica has also acquired an option to purchase a 20% stake in EDF's subsidiary, NNB Generation Company
NNB Generation Company
NNB Generation Company is a subsidiary created by EDF Energy to build and then operate two new nuclear power stations in the United Kingdom. The new plants are to be Hinkley Point C and Sizewell C and will eventually produce up to 6.4GW in total....
(NNB GenCo). NNB GenCo is planning to build an additional 6.4GW of nuclear capacity in the UK.
Wind farms
In 2009, Centrica completed its 180MW Lynn and Inner Dowsing offshore wind farm development and announced plans to build the £725m Lincs offshore wind farm capable of generating over 270MW.Centrica has also submitted applications for consent for two offshore wind farms, Docking Shoal and Race Bank, totalling 1160MW. Subject to approval and construction, by the middle of the next decade these three projects, together with existing operational wind assets, would give Centrica more than 1.75GW of generating capacity in the UK, capable of meeting the annual needs of more than 1.2m homes.
Senior management
For the role of chief executive, Sam LaidlawSam Laidlaw
William Samuel Hugh Laidlaw is the chief executive officer of Centrica, the British natural gas and electricity company.-Early life:...
receives an annual compensation of £1,535,000. This total consists of £906,000 salary and a £629,000 bonus.
Greenwash
British Gas was accused of greenwashing in the advertising of its Zero Carbon tariff in 2008 after the Advertising Standards Association upheld a complaint about the 'greenest domestic tariff' claim.Following this adjudication, British Gas signed up to Ofgem's Green Supply Guidelines which aim to give an objective interpretation of 'green tariffs' and raise the standard of industry products. British Gas supported the stipulation that a green tariff must deliver an additional environmental benefit and not simply charge a premium for renewable electricity that would have been generated anyway under the Renewables Obligation. The company continues to offer Zero Carbon which is based on this principle of additionality.
Customer complaint response
In July 2011 British Gas was fined £2.5m by the energy regulator OfgemOffice of Gas and Electricity Markets
The Office of Gas and Electricity Markets , supporting the Gas and Electricity Markets Authority , is the government regulator for the electricity and downstream natural gas markets in Great Britain...
for failing to deal properly with customer complaints. After a year-long investigation into the British Gas, Ofgem found it had breached regulations on how energy companies should handle disputes. Ofgem found that British Gas failed to re-open complaints from customers who indicated they felt the matter was not resolved adequately, failed to provide sufficient information to complainants about the energy ombudsman service, and failed to deal properly with complaints from micro-businesses because it had not implement the necessary processes and practices.
A spokesperson for British Gas said the company felt that finding it in breach of rules for failing to provide adequate information to consumers about the energy ombudsman was "disproportionate to the mistake".
British Gas Business was fined £1m in July after Ofgem's investigation found the company had misreported the amount of electricity supplied under the British government's renewables obligation. British Gas claims it spotted the problem – it said an over-reporting of the amount of renewable energy it was supplying caused by human error – and notified the regulator.
External links
- Centrica website
- British Gas UK Website
- Profile of British Gas on Gas Guide
- British Gas Fuel Mix for 2006