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Tuesday, 4 July, 2000, 14:36 GMT 15:36 UK
Online energy boost
Virgin is now expanding into the online energy market
Virgin is now expanding into the online energy market
By BBC News Online's Jennifer Laidlaw

For UK energy consumers hoping to cut their bills, going online could be the best option to get a cut-price deal on gas and electricity.

And with ever more utilities offering their services on the web, the online energy market is heating up.

Virgin Energy is just the latest arrival on the market.

Richard Branson's joint venture with London Electricity, announced on Tuesday, promises to slash consumers' bills through its internet-based gas and electricity supplier.

From September, customers can sign up to the service on the internet, and pay a combined gas and electricity bill that promises to be cheaper than any rival offer.

Virgin's energy venture comes hot on the heels of, which launched a similar online business but includes telecoms services to its range.

It is just less stressful and less hassle

Desiree Maghoo, Servista marketing director
Both companies say they can offer the consumer better customer service and guaranteed savings by getting better deals with suppliers and cutting out bureaucracy.

For example, Virgin says it is not tied into long-term contracts with gas and electricity suppliers, putting it in a better bargaining position to offer consumers lower energy prices.

Low-cost business

Virgin Energy claims it is a low-cost business, and promises to pass on lower costs to customers.

"If you combine the two, you get great savings," Jon Kinsey, Virgin Energy's managing director told BBC News Online.

Virgin says its service can save an average four-bedroom house 85 a year and a one-bedroom flat up to 48.

Servista says it can offer consumers savings of up to 152 a year on their gas, electricity and telephone bills.

Both companies are virtual utilities, shopping for cheap capacity and selling it over the internet, which makes for low overheads.

With one in five people in the UK now using the internet, demand for this kind of service is likely to grow, the companies say.

"I'm pretty confident it's inevitable," Desiree Maghoo, Servista's marketing director, told BBC Online. "It utterly suits the management of your services."

Customers can save time and money using an online service, by effectively cutting out the middleman.

"When you do it by phone, it's a nightmare," Ms Maghoo says. "You are passed from person to person."

Paying bills online is "just less stressful and less hassle", she argues.

But it remains to be seen whether these companies can indeed persuade consumers that they are any better than the traditional utility companies.

It could be an uphill battle trying to persuade consumers to switch to them when many have not bothered to change suppliers since deregulation.

Reluctant consumers

According to a report by Datamonitor on the European online energy consumer, 35% of consumers said they had no need for information on online energy services, 19% had not thought about it and 10% were not interested.

About 98% of those surveyed knew that they could change supplier if they wanted to.

But the report also predicted that 16% of European consumers living in countries with deregulated energy markets would switch suppliers online by 2004.

Old utilities go online

And the new internet utilities will also have to face competition from the big energy players.

British Gas says it has been offering both gas and electricity to online customers over the past year.

British Gas still has to examine exactly what these new companies are offering. "We're not quite sure whether (Virgin Energy) is different," Richard Dymond, media relations manager for British Gas told BBC News Online.

Customers can pay telephone bills online with Servista
Customers can pay telephone bills online with Servista
He says British Gas aims to compete through customer service and by offering consumers value for money for its services.

Other established utilities offer special rates to customers who sign up and maintain all correspondence online.

Virgin says it plans to woo customers through its brand name, customer service and guaranteed cost savings - the web site will have a calculator telling consumers exactly how much they can save from their current utility bills.

One of Servista's big selling points is to include telephone bills as part of its service.

Marginalised customers

Online energy deals may be good, for many they are too good to be true.

Online utilities may offer great savings, but they effectively marginalise parts of the population.

Many older people, for example, would benefit the most from promised savings, but do not have internet access.

In a swipe at competitors, Mr Dymond of British Gas says his company wants to ensure all its customers are properly served, despite enhancing its online presence.

Subscriber growth

"We don't want to exclude any of our customers," he said.

He also notes that not all gas and electricity consumers have bank accounts from which they could pay online bills by direct debit.

British Gas has about 14m gas customers and 3m electricity customers, but cannot provide figures how many of those have signed up online.

Virgin hopes to gain 200,000 subscribers in its first year, while Servista declined to give subscriber figures or targets.

Both Virgin and Servista say they have addressed the problem of reaching parts of the population, which do not have internet access.

Virgin's energy products will be available in the group's High Street stores.

Servista, meanwhile, says the company is looking at the issue, and hopes that government initiatives to improve internet access will increase use.

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See also:

02 Jul 00 | Business
Virgin in energy deal
07 Mar 00 | Business
Battle for the internet
07 Mar 00 | Business
Q&A: Internet price wars
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