Ofgas ad campaign must tread carefully

Gas regulator Ofgas is about to do something no other utility watchdog has done before: run a national advertising campaign (MW May 1). It is looking for a direct marketing agency to run a campaign explaining to consumers the benefits of free competition in the gas supply market.

The regulator will have to tread a fine line between stating the benefits of switching from British Gas and not discriminating against it, in what is effectively a public information campaign.

The Central Office of Information (COI), which is running the pitch for Ofgas, has shortlisted Ogilvy & Mather Direct, Triangle, Barraclough Hall Woolston Gray and Maher Bird Associates for the 2m above- and below-the-line account. The move follows a test campaign at the beginning of this year by O&M in the South-west.

Gas is the first of the utilities to be opened up to competition, electricity will come next, followed by water. The Conservative Government announced plans to bring forward the process of gas deregulation to April 1998. But while Labour has said that it will continue with the introduction of competition, it will now review the speed of that introduction.

Ofgas was set up with a remit to encourage free competition in the gas market, something which it claims to have achieved success fully in its pilot schemes. It is one year since 500,000 gas users in the South-west were given a choice of gas supplier.

On the first day of competition – April 29 1996 – 30,000 customers switched from British Gas. By the end of 1996, 86,000 – 17 per cent of users – had been signed up by alternative suppliers in the reg-ion. By March this year, Ofgas said nearly 250,000 domestic customers had changed from British Gas Trading (BGT).

This year, competition has been rolled out in Dorset, Avon, Kent and Sussex. The next stage is to introduce it in Scotland, then the Northern counties and to move southward through England in five stages. London is last on the list.

A spokeswoman for the COI explains the aim of the campaign: “We will tell consumers about the introduction of competition and what the benefits are, such as the potentially reduced cost. In the South-west, prices are down by about 20 per cent… When you introduce competition into any market the prices go down.” However, she adds: “Whether they stay down is another question.”

But encouraging consumers to think about switching suppliers seems automatically to favour alternative companies over British Gas. The campaign will not be able to state this overtly, but could encourage consumers to get in touch with Ofgas for more information. They may be told the average annual domestic gas bill of 325 could be cut by 65 by switching from BGT to other suppliers including Eastern Natural Gas, Northern Electric and ScottishPower.

A spokesman for BGT warns: “Ofgas has a duty to promote competition, but it shouldn’t push any company over another, including us. If we have any concerns about the advertising we’ll be taking them up with Ofgas.”

The test campaign run by Ofgas at the beginning of this year gave British Gas no cause for complaint. The campaign ran in local press and on radio, and used the strapline: “Helping you choose the right flame.” Steve Goodwin, account director on COI business at O&M, which created the campaign, says it aimed “simply to raise awareness that there is competition and the possible benefits of changing. It is down to the individual”.

One element of the upcoming campaign will be building consumer confidence in Ofgas as a brand – a mark of trust in an unknown market. Some consumers may find the prospect of changing from a known gas supplier to one they have never heard of a little worrying.

The Ofgas campaign must allay householders’ fears about a product which cannot be seen or heard, a product which can leak, burn and explode. Confidence in safety is paramount, and if anything goes wrong, then this will surely dent consumers’ confidence that Ofgas is giving them good advice.

The introduction of competition in the South has not been without problems. In the process, Ofgas had to rap some knuckles over unscrupulous selling techniques. As a result SWEB agreed to stop doorstep selling. Ofgas must also warn consumers about the activities of high-pressure doorstep salesmen, and inform them about consumers’ rights and obligations.

With the incoming Labour Government, Ofgas could disappear altogether. Labour is known to favour merging Ofgas with its electricity supply counterpart Offer. And Ofgas’ director general Clare Spottiswoode’s opposition to a windfall tax on privatised utilities is not considered to have increased her chances of hanging on to a job. But the party says it is committed to introducing competition “where possible” in the utilities market, so the roll out of competition in gas supply will continue, and the advertising campaign with it.

BGT denies it has any plans at present to develop a rival campaign – indeed how could it reasonably argue against the benefits of competition? But in the spirit of free competition, BGT will be hatching plans to attract customers back that it has lost, and hang on to the overwhelming part of the population that has used it for decades.