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Ian King interviews Centrica Chairman, Rick Haythornthwaite

Sky News, Ian King Live 25 June 2014

Ian King interviews Centrica Chairman, Rick Haythornthwaite

Ian King:

The energy regulator, Ofgem, is expected to formally refer the sector to the Competition and Markets Authority imminently. The probe comes amid growing criticism of the industry by public and politicians alike. At the same time, the country’s largest supplier, British Gas, and its owner, Centrica, are having to deal with the exit of some of their top bosses. In January, Centrica’s Group Finance Director, Nick Luff, announced his resignation; he will be gone by the end of the year. Last month, the Managing Director of British Gas, Chris Weston, quit to become Chief Executive of the temporary power provider, Aggreko, and Centrica’s Chief Executive, Sam Laidlaw, is expected to confirm his departure within weeks.

Well, earlier in his first TV interview since taking the job, I was joined by Rick Haythornthwaite, Chairman of Centrica, and I began asking him on his thoughts on Ofgem investigating the energy sector.

Rick Haythornthwaite:

You might be surprised to hear me say that I'm happy it’s taking place. You can imagine taking on this role, as I did in January, the first thing I wanted to do was to understand what was happening in the sector and I've spent a lot of time talking with customers and politicians, and customer groups and the regulator, and our employees around the world, and it would come as no surprise to you that there is a lack of trust in the system, but most importantly, I think there is a lack of a commonly held independent data set around which we can actually rebuild the trust. I trust the CMA to actually provide an objective, independent view, and I think it’s very important to taking the sector forward, which we need to, because we've got some pretty important things we need to solve together.

Ian King:

Are you confident that they will look at the sector in the round; they won't just narrowly focus on consumer bills, they will look at the wider picture, the wholesale markets, the macroeconomic picture? Are you confident that that will happen?

Rick Haythornthwaite:

I hope so. I mean we've asked for that. We've encouraged that and we will find out during the course of this week, but I do think it’s very important to really look at the bill as a whole, because clearly there is a lot of discussion around wholesale prices and yet the bill is far more than wholesale prices, which although they are going down right now with the warm winter, spring, and early summer, the environmental and central costs are going up, transmission and distribution costs are going up, and we need to understand, everyone needs to understand, the basis of that. Equally, I think it’s important to understand the role that the Government and regulators can play in making sure that we turn around this sector.

Ian King:

I mean you mentioned wholesale prices have fallen. Ofgem recently wrote to all the suppliers asking them why prices haven't come down in line with that. Surely, in an efficient market, they would have.

Rick Haythornthwaite:

In an efficient market, all the competitors have to decide what they think their customers, their target customers need, and our target customers – I think history tells us – are very interested in price, but they are also interested in predictability in what is a very uncertain world right now, and it is not unreasonable for some players to take a view that they should buy gas forward, which we do and in great service of the nation we believe. I think what is important in a competitive market, is that customers understand what is on offer to them, can make a choice based on the clear facts and can switch quickly. I think and hope when the CMA looks at the sector, they will understand, actually, there are a lot of players competing hard, but right now, we’re not free to create our own competitive position through the way we present our case and our prices and our offering, and we certainly can’t switch quick enough, and I think that is what we want to focus on. Centrica is absolutely committed to making sure that we’re transparent and customers have the choice and the ability to switch quickly.

Ian King:

Right, now, tell us about Centrica itself. Nick Luff the Finance Director is off, Chris Weston the Managing Director of British Gas is leaving, it is widely assumed in the market that your Chief Executive, Sam Laidlaw is off as well. Who is calling the shots now? Who is making the decisions? It looks, from the outside like a rudderless operation, as one analyst put it. Sky News, Ian King / Rick Haythornthwaite

Rick Haythornthwaite:

Sam Laidlaw is very firmly in the CEO seat. Now, when I took this over it is no surprise that I was going to have to think about succession, the Board as a whole was going to have to think about succession. With Nick announcing he was going to Reed Elsevier, we started a process to think about what options there may be as and when Sam decides to step down after eight years with distinguished service, so that question we knew we had to answer. I think the bigger question that I wanted to answer, and ask when I first arrived was, is there strategic momentum? Is the company moving forward? I have spoken to a lot of people and one thing that comes forward very quickly is we have got a lot of people, strength and depth, the strategy is very clear, downstream, midstream and upstream and the company is driving it through. Sam is leading it and we will manage the succession in a very measured fashion.

Ian King:

You touched on the toxicity of the debate surrounding energy, is Chief Executive of Centrica an impossible job?

Rick Haythornthwaite:

I think the Chief Executive of Centrica is one of the most intriguing jobs in Britain. It is a big job, it is a complex job and it matters, and good people who really are the right people to do the job actually find that challenge exhilarating. I have no doubt that we will find a good candidate to do the job.

Ian King:

Three things you need to know about this, in 2012 Centrica generated £4.2 billion in total tax receipts, equivalent to £158 for every household in the UK. British Gas ranked fifth for customer satisfaction among the big six suppliers last year, and an investment of £1,000 in British Gas’ privatisation in 1986 would with all dividends reinvested have been worth £19,000 as at the end of last year. Sky News, Ian King / Rick Haythornthwaite

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