Business
British Gas boss concerned for Scotland’s energy industry jobs
Michael Race & Sean FarringtonBusiness reporter & business presenter
Chris O’Shea hasn’t lived in Scotland for decades but the boss of Centrica, the owner of British Gas, is worried over the future of the energy industry in his homeland.
He is concerned that the “demise” of drilling for gas and oil in the North Sea and the move to green energy will not create new roles quickly enough to offset job losses.
His wide-ranging interview with us follows a series of difficult moments for the industry as soaring energy prices pushed household bills up and saw bumper dividends to shareholders and pay packets to bosses – including him. British Gas also faced a scandal over force-fitting prepayment meters in the homes of vulnerable people who fell behind on bills, something he says the company doesn’t do anymore.
Today O’Shea says his big concern is the decline in jobs in the North Sea oil and gas industry. The UK’s largest oil and gas producer, Harbour Energy, announced job cuts earlier this year. And this month, the Port of Aberdeen said it would cut roles in the face of what it described as a “staggering” fall in North Sea oil and gas activity.
“The energy transition is the right thing for us to do. It’s essential,” says O’Shea, pointing out that British Gas no longer explores for oil and gas in the North Sea and benefits more from energy being imported from overseas.
That’s not to say he doesn’t think there should be more drilling in the North Sea.
“Whether you look at this from a cost point of view or whether you look at this from a carbon point of view or environmental point of view, the gas that you produce domestically will often be cheaper than the gas you import, and it will definitely be cleaner than the gas you import,” he says.
But going back to the transition to green energy, he tells the BBC’s Big Boss Interview that the question is over the pace at which it needs to happen, drawing on personal experience.
“I grew up in the town of Fife, which was surrounded by coal mines. I saw the devastation when the coal mines were closed during the miners’ strike and people that had incredibly well-paid jobs – they went to no work at all.
“You’ve got second, third-generation people that are not in work now. And I desperately want to avoid that through this transition.”
He says he found it quite hard to get a job after university and “got loads of rejection letters”.
“I know what it’s like to be a bit worried about getting a job,” he says.
“I also know what it’s like to get a job that you like, and you find out that you’re good at, it can change your life – it certainly did for me.”
However, the chief executive is no stranger to cutting roles, having axed the best part of 5,000 soon after he took charge during the height of the Covid pandemic in April 2020.
“I wasn’t sure the company was actually going to survive,” he says. “The only way I could justify that to myself was I was trying to protect 20,000 jobs, I couldn’t protect them all.”
Since then, Centrica has taken on 1,700 apprentices and has committed to taking on one more every day for this decade at least.
Much like energy prices in recent years, it’s been a volatile time in the hotseat for O’Shea.
As wholesale energy prices soared in part due to supply issues following the outbreak of war in Ukraine, many small suppliers went bust as they were unable to afford the fixed-price deals they’d locked into with customers.
“It’s all down to poor regulation,” O’Shea says, arguing that energy regulator Ofgem should have been stricter on making sure suppliers had enough cash to manage risks.
“You cannot have a system whereby the profits are privatised and the losses are socialised,” he says.
Ofgem told the BBC its regulation meant the sector “now holds around £7.5bn in assets, a significant reverse from -£1.7bn during the crisis, meaning they are now better protected against failure, and the impact this has on customer’s bills”.
As energy bills surged, there were questions over bumper dividends to shareholders, and O’Shea’s own salary and bonuses which hit £8.2m in 2023.
“Investors invest and they want a return,” he says. “People don’t put money in the bank and say, ‘it’s ok, don’t give me any interest’ and investors don’t buy shares and say, ‘it’s ok, don’t give me any return’.”
Those dividends, O’Shea argues, are not generated from British Gas customers, and are as a result of other parts of Centrica’s diversified business.
“There is very little profit that’s made in the energy retail business. You’re capped on the profit that you can make at 2.4% of your revenue,” he says.
The 52-year-old faced a huge public backlash after it emerged that debt agents working for British Gas were breaking into people’s homes to fit prepayment meters.
“We are not doing that at the moment,” he says when asked if this has resumed.
But he argues the regulator Ofgem needs to tell firms how to act when people don’t pay and how to find out who cannot pay and who refuses to.
“My heart goes out to those people who can’t pay, but those people who choose not to pay are freeloaders and we have to find a way to differentiate and go after the people who choose not to pay, and to remove the distress from people who are unable to pay,” he adds.
He seems supportive of potential plans for the chancellor to announce relief for billpayers in the Budget, such as cutting the current 5% rate of VAT charged on energy.
“Anything that reduces the cost of energy, I would welcome.
“But the reality is we have got to pay for it in some way,” he warns.
Business
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Many households’ energy bills will rise from today, just as a swathe of cold health alerts have been issued for large areas of the UK.
The 0.2% increase to Ofgem’s energy price cap will equate to a rise of about 28p a month for the average household in England, Wales and Scotland remaining on a standard variable tariff.
This amounts to an average overall bill of £1,758 a year, up from the current £1,755.
However experts at Cornwall Insight have forecast energy bills to fall by £138, or 8%, to £1,620 a year when the cap is next updated in April thanks to Government measures announced in the recent budget.
Chancellor Rachel Reeves said £150 would be cut from the average household bill from April by scrapping the Energy Company Obligation (Eco) scheme introduced by the Tories in government.
Wholesale energy prices have also dropped in recent weeks, which is set to keep a lid on price hikes from April, Cornwall Insight said.
Regulator Ofgem said Thursday’s increase to the cap, which was announced in November, was being driven by the funding of nuclear power projects and discounts to some households’ winter bills.
This included funding the Government’s Sizewell C nuclear power plant in Suffolk – with an average of £1 added to each household’s energy bills per month for the duration of the £38 billion construction.
An increase to standing charges – the amount consumers pay per day to have energy supplied to their homes – was also largely due to costs linked to the Government’s Warm Home Discount scheme.
Around 2.7 million more low-income households, including 900,000 families with children, are eligible for the £150 discount this winter.
However, the regulator said the new price cap was £37 lower than a year ago when adjusted for inflation.
Ofgem’s price cap sets a maximum rate per unit and standing charge that customers can be billed when they are not on a fixed tariff.
It does not limit total bills because households still pay for the amount of energy they consume.
The price cap increase comes just as a yellow warning for snow and ice has been issued for parts of Scotland north of the central belt from 6am on New Year’s Day until midnight on January 2.
Meanwhile, amber cold health alerts have been issued for the North East and North West of England, which are due to remain in place until noon on January 5, with temperatures expected to fall to 3-5C.
Yellow cold health alerts have been issued by the UK Health Security Agency (UKHSA) for London and the East, South East and South West of England, as well as the East and West Midlands and Yorkshire and the Humber.
Ned Hammond, the deputy director of Energy UK, which represents suppliers, said: “While the new price cap coming into force only includes a small rise, it still means energy bills are too high for too many households. Gas prices may have declined in recent months but remain higher than previous years, while increasing policy costs are also adding to bills.
“The Chancellor’s intervention in the Budget to move a significant amount of policy costs into taxation was welcome and will provide much needed relief for households across the country when this comes into effect in April.
“However, even with this intervention, energy bills are expected to remain well above pre-energy crisis levels. With over six million households in fuel poverty and domestic energy debt reaching record highs of around £5.5 billion, a comprehensive plan is needed to further bring down bills and truly address these challenges.”
Simon Francis, co-ordinator of the End Fuel Poverty Coalition, said: “It really is a case of every little doesn’t help as households spend a fifth winter in the energy bills crisis. Tiny movements in the price cap still hit hard for families choosing between heating and eating.
“People continue to live in cold, damp homes, where the risks go beyond discomfort and into real danger, including exposure to carbon monoxide. Younger adults, private renters and households with children are among those most at risk as people cut back on heating, delay repairs and try to block draughts just to stay warm.
“Meanwhile, the wider energy industry has made more than £125 billion in UK profits since 2020, including firms operating in a dying North Sea. This isn’t a crisis of scarcity, it’s a crisis of priorities. Ministers must move beyond short-term price cap tweaks and get serious about ending fuel poverty by investing in energy efficiency, reforming energy pricing, introducing a fair social tariff and fully funding the Warm Homes Plan.”
Which? energy editor Emily Seymour said: “As we head into the coldest months of the year, many households will be concerned that the energy price cap will increase slightly in the new year.
“There are several deals on the market for lower than the price cap so now is a good time to shop around if you’re looking to fix. As a rule of thumb, we’d recommend looking for deals cheaper than the current price cap, not longer than 12 months and without significant exit fees.
“If you’re on a variable tariff, make sure to submit a meter reading to ensure you pay the cheaper rates for any energy used before the new price cap takes effect.”
Dr Craig Lowrey, principal consultant at Cornwall Insight, said: “Households will welcome a cut in April, bringing the cap to its lowest level since 2024. That’s a step towards the Government’s £300 reduction target by 2030 and will ease some pressure on both families and policymakers.
“But we need to be clear – costs aren’t vanishing, they’re shifting. Moving the Renewables Obligation from bills to taxation may feel like a win, but ultimately, it’s still going to be paid by the public.
“Crucially, as we move forward, vulnerable households must be protected. Cutting bills today is welcome, but without targeted support and a clear plan for fairer funding, the benefits of net zero could bypass those who need them most.”
Kevin PeacheyCost of living correspondent
Getty ImagesEnergy bills are rising for millions of households in England, Scotland and Wales as the new year begins, after Ofgem raised its price cap slightly.
Prices for those on variable tariffs are rising by 0.2% from now, the equivalent to a £3 annual increase for a household using a typical amount of gas and electricity.
Campaigners say this means billpayers are facing another winter of high energy prices with the latest increase, albeit small, coinciding with the coldest period of the year.
However, changes announced in the Budget should mean a fall in the cost of energy from April.
Regulator Ofgem’s energy price cap sets the maximum price for each unit of gas and electricity for those on variable tariffs, not the total bill – so those who use more energy, pay more.
The regulator’s cap is illustrated with a household using a “typical” amount of 11,500 kWh of gas and 2,700 kWh of electricity a year with a single bill for gas and electricity, settled by direct debit. This household would see a £3 rise in its annual bill from £1,755 to £1,758.
However, the amount used varies significantly between households, so the best way to calculate the change is to work out the percentage change from your own usual annual bill.
Standing charges – the fixed costs that cover the cost of running the network as well as government levies – will rise by 2% for electricity and 3% for gas, driving the overall increase.
Electricity unit rates are rising, offset by a slight fall in gas rates, meaning that heavy users of electricity will see the biggest impact.
The price cap affects England, Wales and Scotland, as the sector in Northern Ireland is regulated separately.
Ofgem says people can often save money by moving to a fixed tariff. That sets the unit price for a certain period of time, so anyone already on a fixed deal will not see a change now.
Emily Seymour, energy editor at consumer group Which?, said there were several deals on the market at prices lower than the price cap.
“As a rule of thumb, we’d recommend looking for deals cheaper than the current price cap, not longer than 12 months and without significant exit fees,” she said.
For many households, the heating will be on for longer as we enter January and February, with snow and ice warnings in place for some areas.
Some vulnerable households in certain areas of England, Wales and Northern Ireland are receiving cold weather payments, worth £25 a week, if the average temperature in a local area is recorded as, or forecast to be, 0C or below for seven days in a row.
Households can check their eligibility via a government online service. A separate winter heating payment operates in Scotland.
The £150 Warm Home Discount has been extended by the government to apply to more lower income households.
Simon Francis, from the End Fuel Poverty Coalition, said more needed to be done to help those who were struggling following the latest, small price increase.
“This is a case of every little hurts… we need to see much lower bills but also measures to keep people’s homes warmer every winter.”
James Jones and his wife Christine, like millions of other pensioners, have seen their winter fuel payment reinstated following a government U-turn on restricting the allowance.
“Obviously we’ve got it for the cold months. We’ve got the central heating on more. It’s made a big difference. You know it’s coming, so it’s your standby,” said Mr Jones.
But the Warrington couple are still cutting back on luxuries to cover bills.
“We get a rise on our pension but it gets taken off you by food, petrol and everything else going up all the time so really you don’t benefit,” he said.
There is some hope on the horizon in spring, though. In the Budget, Chancellor Rachel Reeves said some levies placed on energy bills would go, lowering bills for millions of households by £150 a year from April.
That included cutting a scheme that was designed to tackle fuel poverty and help reduce carbon emissions, as well as shifting some costs onto general taxation.
People on fixed deals in April would still benefit from the changes, the government has confirmed.
However, about £30 will be knocked off those annual savings from April to pay for maintaining gas networks and strengthening the electricity transmission network.
There are also signs of lower wholesale costs, paid by suppliers.
Analysts at energy consultancy Cornwall Insight predict an 8% drop in the price cap in April – the equivalent of a fall of £138 to £1,620 a year for a household using a typical amount of gas and electricity.
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