How British Gas became a 'national joke'

Last week was the worst in the company's history. Michael Streeter reports on a catalogue of errors

For British Gas, submerged under a deluge of complaints about incorrect or late bills, disconnection threats and a widespread breakdown in customer service, the past three years have been a brutal lesson in the fickleness of public esteem.

On 27 October 1993, John Major presented the company with a Charter Mark for the "excellence" of its service, recognition of a standard of customer care regarded as second only to Marks & Spencer in British industry. Now, the epitome of high class has turned to low farce. Opinions vary about why this great British utility fell so far, so fast, but the post-fat cat and Cedric Brown outcome is clear. In the words of one senior British Gas source: "We have now become a national joke."

The current crisis, which threatens to make the company the new British Rail of saloon-bar wags, was summed up by the respected director of the Gas Consumers Council, Ian Powe, who said: "We have never known such consumer anger."

The problems lie with new computer systems, which have sent thousands of reminders - which warn of disconnection - to households before the first bill has been sent. In eastern England alone this malfunction - "possibly" caused by a computer virus, says the company - has affected 12,000 customers, with many others affected in the North-east, South-east, London and South Yorkshire.

Other customers paying by direct debit have found huge sums of money wrongly removed from their bank accounts.

Among complaints highlighted by the GCC is a doctor from Middlesex who had pounds 3,796 deducted from his account by British Gas even though he had been assured the real figure was just pounds 39. There were even unconfirmed reports that some people had been disconnected despite paying their bills.

A separate problem has been the failure of British Gas Service to respond to many contract customers, thanks to its own computer and communications problems. The rash of errors has provoked a huge and angry reaction from consumers.

Unable to get through on jammed British Gas phones to complain, disgruntled consumers have been targeting the GCC offices instead. The calls have come in at a rate of 100 an hour, and the GCC had to shut down its London office each afternoon last week to cope with a backlog that included 70 written complaints a day. Electronic monitoring showed 2,300 calls went unanswered in this period.

Complainants have also been mistakenly ringing the emergency phone number used to report gas leaks, causing the pipeline arm of British Gas, TransCo, to worry about possible delays in real emergencies.

The volume of complaints is the worst example yet of growing dissatisfaction over the past two years. The GCC reports that the number of complaints about bills in July - a "quiet" summer month - rose by 210 per cent on last year; over the first seven months of this year they have risen by 30 per cent, to 27,278.

Aware of the impending crisis, British Gas recently announced it was spending pounds 70m, recruiting 700 extra staff and opening two new telephone answering centres to cope with the dissatisfaction - this after sacking 25,000 people in recent years, including 3,000 in customer service and support operations.

The need for such Alice in Wonderland economics was caused by decisions of British Gas Trading, which handles the 19 million domestic users' bills, and British Gas Service, which runs the customer service contracts, to move to new computer systems at the same time this year.

The dash to switch to a new billing system - called Tariff Gas Billing - after losing experienced staff was bad enough. When this was combined with similarly untried computer and telephone systems, for the contract customers, and the first spell of cold weather, the effect was catastrophic. As one observer said: "No company could expect to cope with that conjunction of events."

Ian Powe is scathing. "British Gas has put too much faith in untried systems and has installed them too quickly, with inadequate back-up from too few staff and at the wrong time of year."

The background to the changes was the Government's decision to open the gas supply industry to competition. As required, British Gas ringfenced its pipeline division, TransCo, from the rest of the company, but then chose, at the cost of millions of pounds, to split the remainder into different sections, including British Gas Trading, Service and Retail.

This costly enterprise will be changed again when TransCo International becomes completely separate and British Gas Energy becomes the new umbrella for customer service and sales of gas.

The ultimate blame for this mess is handed around as if in a game of pass-the-parcel.

Nigel Griffiths, Labour's consumer affairs spokesman, blames the "pure free-market economics" of Clare Spottiswoode, the director-general of Ofgas, which he says have forced British Gas to move too quickly towards the marketplace. He wants the Government to set up a ministerial gas consumers' crisis committee. Ofgas says it has merely ensured that the company kept to a government-imposed timetable. The Department of Trade and Industry claims that in discussions a few years ago British Gas "had agreed they could cope".

Meanwhile, the company, accepting that the current problems could take five weeks to resolve, says competition meant it had to install the new billing system in 18 months - "an extremely tight timetable", said a spokesman. He said a computer virus was a "possibility" as a source of the problem, but engineers were working flat out to ensure the system worked properly.

The real worry is the impact the crisis is having on British Gas's domestic markets. Already in the South-west open-market experiment the company has lost 15 per cent of its 500,000 customers, a pounds 25m loss in revenue. By 1998, when all ofBritain will be open to competition, the loss of revenue on today's figures would be pounds 900m out of a total of pounds 6bn. And despite having 15 per cent of the business, rival companies in the South- west account for only 4 per cent of customer complaints.