Phil Bentley has spearheaded a charm offensive at British Gas, turning around its fortunes. John Collingridge met him.
YOU need a thick skin as managing director of the UK’s biggest power supplier.
Phil Bentley is the man hauled out to explain every time British Gas says bills are going up.
When its parent company Centrica reports record profits, Bentley is forced to defend British Gas against accusations of profiteering and making hard-up customers choose between heating and eating.
Does he get fed up with the constant sniping about profiteering? “Yes,” replies the Yorkshireman with a grin.
But, he argues, price hikes should come as no surprise. He has been warning of them for quite some time. We’re caught in an energy “trilemma”, he explains, for which there is no cheap or easy answer.
Firstly, there’s security of supply – as the North Sea oil and gas reserves are bled dry, we must look further and further afield for energy to supply our small island. “We don’t want to be relying on one source, like Russia.”
Secondly, there’s affordability. British Gas reported a 24 per cent jump in profits to a record £742m last year, as customers used more gas and electricity to heat their homes in the coldest winter for years. It’s already warned bills are likely to go up this winter.
Thirdly, there’s the green agenda, as energy companies are hit with increasingly tough rules on carbon emissions.
Faced with these three competing arguments, something has to give. “You can usually rely on doing two of the three,” he says.
Bentley, who was finance director of Centrica before taking the British Gas lead, reels off the prices of power generation for the various energy sources with practised ease.
Although coal is the dirtiest way of generating power, it’s also the cheapest at £40 per mega watt hour (MWh). The simple fact is that moving everything to renewable power generation such as offshore wind (£110MWh) and solar (£400MWh) would cost too much, and require considerable subsidy.
“There’s huge investment needed in the grid. We’re trying to invest in smart meters.
“We don’t want the lights to go out so there’s huge investment needed in clean generation as coal is removed off the network.”
Where does Bentley sit on the climate change argument? His answer comes in negatives.
“I’m not a scientist. There’s significant evidence to suggest that there’s substance to it.
“Philosophically I would say I’m not a climate change sceptic.”
But regardless of whether man is responsible for warming up the earth’s climate, pressure is growing on power companies to clean up their act. The tide is moving inexorably towards generating more of our power from renewable sources.
“The energy industry emits the most CO2. We’re a responsible corporate organisation in the energy sector. We have to take the lead.”
Centrica, which has no coal-fired power stations, has huge wind farms off the east coast and plans more, in the Irish Sea. However, last year the group pulled out of a planned carbon capture and storage (CCS) trial, which would have involved trapping and storing emissions, blaming cost and uncertainty. Bentley says the group’s stance on CCS is to “watch and see”.
He was speaking as the bar was raised even higher by a Government pledge to halve carbon emissions by 2025. These growing pressures can only lead to higher bills, says Bentley.
“It means we’re going to be paying more per unit. The hope is that we can all make homes more energy efficient.”
It’s a curious paradox – an energy company encouraging its customers to use less power. But British Gas claims to be making considerable headway on helping its customers do just that.
Bentley recalls a competition in 2009 to find the greenest street in Britain. Green Lane in Leeds eventually won, with residents shaving 32 per cent from their energy bills. When Bentley took the energy minister round to show the progress the street had made, one couple had taken it so seriously they were sitting in darkness.
British Gas is also leading the smart meter revolution. Its Smart Energy Centre in Leeds, launched last October, is training an army of engineers to install meters which tell householders how much power they are using. British Gas is also offering its customers free loft or cavity wall insulation if they sign up to its dual fuel tariff.
“We know the customers will save £150-£180 per year but our view is it’s the right thing to do.
“If we do it well we’re likely to increase the loyalty of our customers. There’s a commercial element to it too.”
It appears to be working. When he was appointed managing director in 2007, the company was losing a million customers a year and was the worst for customer service.
Last year British Gas added 500,000 customers, and now has about 700,000 residential customers in Yorkshire.
Much of this is down to an overhaul in standards at British Gas, he says.
“When I first went up to Leeds there was a sign on a roundabout saying ‘British Gas, recruiting now’. It was like saying, ‘We’ll take anyone’.”
He says British Gas’s call centres now have a staff churn rate of between 10 and 12 per cent – world class is 20 per cent. The awards page on its website includes accolades such as Best European Call Centre, Complaints Team of the Year and one of the Top 25 Best Big Companies to Work For.
With all of this in mind, Bentley believes people are failing to see the bigger picture when they accuse the company of profiteering.
“Our margins are five to six per cent; I don’t regard that as high. There are huge risks to what we do.
“We have to buy the energy for what we need. The forward market is predicting that prices will rise.
“When it comes to it the winter could be warm and we will have bought more gas than we need.”
There’s also the risk – heightened during a recession – that customers do not pay their bills. Bad debt provisions cost British Gas £300m a year.
He cites the new tax raid on North Sea oil and gas production, hiked from 20 per cent to 32 per cent, as another challenge to the group’s competitive position.
“We’re not going to be investing in exploring for oil and gas on the higher tax rate,” says Bentley. “It’s a ridiculously high tax rate, higher than Libya and Syria.
“It makes us one of the highest tax rates in the world.
“We’re not trying to threaten people. We’re just trying to tell them what the economically rational consequences are. We don’t make policy, we react to it.
“We need policies that are joined up.”
Brought up in Bradford, Bentley attended Woodhouse Grove independent school in Apperley Bridge. He started studying medicine at Pembroke College, Oxford, after being “persuaded it was a good thing to do”. But attracted by big business, he soon switched to economics.
On leaving Oxford, he joined oil giant BP, where he spent 15 years. He later gained an MBA from Insead in France.
Bentley joined Centrica in 2000 from drinks firm Diageo, where he held a number of senior roles.
These days he and his family split their time between homes in London and Dorset. He visits his parents and brother, who still live in Guiseley, but admits he “prefers the weather down south”.
As British Gas approaches its 200th year, Bentley claims the firm, which is “more than just a gas company”, has more relevance than ever.
“British Gas brought North Sea gas to the home. It’s now leading the way in low carbon technology.
“It has to be the most important industry in the world. Wars are fought over it. Economies are built over it. Everything needs energy.”
Date of birth: 14/1/59
First job: Working with a Bradford galvanising company as a student
Car driven: Low emissions Mercedes
Last book read: Dead Men Risen: The Welsh Guards and the Real Story of Britain’s War in Afghanistan, Toby Harnden
Favourite film: Saving Private Ryan
Favourite song: Anything by Coldplay
Hobbies: Rugby, sailing, golf and horse-riding
Most proud of: My kids and my wife, who’s writing a book at the moment