Bord Gáis chief breaks down the bill for low-carbon future

Catherine O’Kelly confesses that she loves energy. It captivated her when she was studying politics, philosophy and economics at Oxford. “I knew I wanted to work in energy,” she says, arguing that it influences geopolitics, underpins economies and even affects our behaviour.

Her affection for it is probably a good thing, as last September O'Kelly became managing director of Bord Gáis Energy, the former State company now owned by UK utility, Centrica.

It once supplied only natural gas to homes and businesses; now it sells electricity as well, and it owns Whitegate generating plant in Cork, which produces enough power for about 500,000 households.

O’Kelly worked in Centrica’s upper echelons, so was involved in its bid for Bord Gáis in 2014.

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She “jumped at the chance” to run the company when the opportunity arose last year, moving her family from Britain in the summer before starting the job in September.

“Something that shone out for me from the beginning and I really was struck by when I moved over here was the calibre of the people that we have here and their complete commitment to what they do. It’s a good place to work,” she observes.

She highlights two features. One is Bord Gáis employees’ customer focus. “People think first, how will this work for the customer? Is this what the customer wants from us?”

The second is expertise. "An example of that would be the team based in Cork who run Whitegate Power Station and also have the trading operation down there. They are the guys who compile the Bord Gáis Energy Index (a monthly snapshot of price trends). I think they are amongst the leading energy authorities in Ireland. "

Rewarding loyalty

The workers’ efforts appear to be paying off. Recently the company hit a milestone by recruiting its 700,000th customer. Centrica’s figures show the Irish division grew revenues 10 per cent last year to £907 million sterling.

Operating profit was £44 million, down 6 per cent because of scheduled maintenance on Whitegate. Complaints to the Commission for Regulation of Utilities registered at six per 1,0000 customers, down one third on 2017.

O’Kelly stresses that Bord Gáis focuses heavily on keeping customers and rewarding their loyalty. It will spend €10 million this year on technology that includes a made-over website, relaunched in February.

“It becomes much simpler for you to interact with us online,” O’Kelly explains. “You can just pay your bill very quickly, you can very simply see how much energy you have used, what your historical bills have been.”

It will also keep track of what customers have earned through the company’s rewards club. This is central to keeping customers and has partnerships with the GAA and the Bord Gáis Energy Theatre. The company will augment these soon with a deal with family holiday camp operator, Center Parcs, which recently opened in Co Longford.

“That’s the front end,” she says. “The back-end technology is all about automating, what this business has done well for some time, using analytics to really understand its customer base.

“Again, if I reflect on my own observations coming here, and equally, on how Bord Gáis Energy is regarded within the Centrica Group, it’s very advanced in terms of using analytical tools and methods to understand its own customers, and therefore know how to engage with customers in a way that resonates most with them and appeals most to them.”

Lower prices appeal to customers but, in March, Bord Gáis joined other suppliers in increasing charges. It boosted gas prices by 2.5 per cent and electricity by 4.5 per cent, calculating this would add €1.56 a month to a typical gas bill and €3.70 a month to electricity bills.

“We’d held off longer than other competitors in the market, as long as we could, and then raised our prices as little as we could,” O’Kelly argues. “The fundamental driver was changes in the wholesale costs, as it always is.”

Price cuts

Wholesale prices are what Bord Gáis pays for the energy it sells to customer, gas it buys from several sources. It generates electricity and buys more through deals with other generators or from the open market. Other suppliers do the same. However, some figures show that wholesale costs, or elements of them, fell while Irish energy suppliers blamed them for price hikes.

“The gas prices subsequently have been moving,” O’Kelly acknowledges. “The thing to bear in mind is that we buy our energy in a laddered way, up to six months in advance, so that we are not subjecting our customers to the daily moves in price, for that reason we continue to keep a very close eye on prices.”

So will the company cut prices? “I point to the fact Bord Gáis Energy had three consecutive price decreases. We will have a look and see what it is possible to do, because we want to be as competitive as we can be, because it is a truly competitive market out there in Ireland on price.”

There is a theory that energy suppliers prefer holding market share to competing. Thus, they won’t cut prices to lure customers from others, fearing this could prompt rivals to reduce theirs, ultimately upsetting the whole profitable apple cart.

O’Kelly dismisses this, describing the market as fiercely competitive. “The way that I look at it is we ourselves have to have our prices as low as they can be for customers, and our prices are competitive in the market. Our standard prices are the cheapest out there for gas and they’d be the second cheapest for electricity and dual fuel.”

Rewarding customers’ loyalty is a “huge part of that competitiveness”, she adds. A further strand is selling them other products and services. “It isn’t just about getting the commodity from Bord Gáis Energy. It’s about broadening that relationship to include services like boiler servicing, which is a natural place for us to be.”

“Then,” she says “there’s the whole world of the connected home.” This is technology that enables people remotely control things such as lights, heaters, even cameras.

“All of that is building out a relationship with us as a company that goes beyond the immediacy of your commodity and your price. I find that a very competitive market to be in and that’s where we’re going.”

Energy usage

The latest strand in this should be the smart meters that ESB Networks is committed to providing to the Republic's homes and businesses. These should allow customers to tailor supply to their needs.

“I think this is technology that can serve to really improve people’s engagement in what their energy usage is in their own household,” O’Kelly predicts. “The first of them are coming this year and then it will take some time for the smart services to be enabled. For us, it will be about competitive differentiation by offering customers more services enabled by smart metering.”

This is nothing new for O’Kelly. She ran a smart metering programme for British Gas, a British Centrica subsidiary similar to the Irish company. Before running that and other projects, she worked as chief of staff to the Centrica chief executive for almost four years following an initial stint in strategy.

After Oxford, O'Kelly joined Booz Allen as a consultant, first serving oil and gas clients in exotic places such as Nigeria and Jakarta, before moving more into renewables. She then spent a year on secondment with the Carbon Trust, a London-based organisation dedicated to moving to a sustainable low-carbon economy.

O’Kelly enjoyed consulting but felt it lacked something. “I loved it. As an adviser, you get to see a lot of problems and deal with a lot challenges that companies have, but you don’t really get to follow them through. And that for me was why I wanted to go and join a company, and that company was Centrica.”

Despite her name O’Kelly has no direct Irish connection. It comes from her husband Ronan, who was born in Britain but whose family are Dubliners. She hails from the UK although her father is from San Francisco. The opportunity to run Bord Gáis brought her here.

Working through such practicalities as seeking accommodation and pre-school places, she and her husband saw first-hand some problems that policymakers and others fear could deter both skilled people such as her, and overseas investors, from coming here.

Those challenges exist mainly because the Republic is thriving, O'Kelly says. Nevertheless, she agrees that "it does need to be thought about". The good news is that as they got around, hiking in Wicklow, west Cork and Kerry, the ups outnumbered the downs.

“We genuinely loved moving to Ireland. There’s nowhere that’s happier for our family than being on an Irish beach with two small children whatever the weather.”

Corrib field

Different challenges face the Republic’s energy industry. The growing economy is increasing demand while new data centres will need the same amount of electricity as Dublin within the next 10 years. O’Kelly indicates that Bord Gáis could build another generating plant, possibly gas-fired, like Whitegate, which cost more than €400 million.

“Part of being a customer supply business in Ireland is ensuring that you’ve got the supply to back that up. Whitegate does a great job for us but we do also have an eye to the trends going on in the Irish market and the need for new supply to match the new demand, so we’re certainly looking at it,” she says.

Natural gas is key to supplying this demand, it produces 60 per cent of electricity. However, our indigenous source, the Corrib field off the Mayo coast, which now provides 50 per cent of our needs, will last only half way into the next decade, leaving us dependent on pipes connected to the North Sea and European network via Scotland.

Our options are find another Corrib, build a plant to convert liquid natural gas (LNG) back to gas, and use renewable gas, in our case, biomethane from cattle slurry. Exploration may turn up a new reservoir, but the probability is low.

Meanwhile, the High Court has referred An Bord Pleanála's decision to grant permission to Shannon LNG to build a €500 million plant near Ballylongford in Co Kerry to the European courts for a ruling on the Habitats Directive, stalling its construction. A second proposal for Cork Harbour is at a far earlier stage of planning.

O'Kelly remarks that in a recent report, the International Energy Agency (IEA) suggested that the Republic build an LNG plant to help ensure future supplies. "I think that needs to be looked at as a real option," she says, but adds that anything built to ensure energy security has to be done at a cost that customers can afford and be sustainable.

Gas Networks Ireland, the State company responsible for the pipes that transport the fuel (whose chief executive, Denis O'Sullivan, supports LNG) is piloting already-proven technology to turn slurry into biomethane. O'Kelly says Bord Gáis supports this.

Her company generally supports renewable power. Bord Gáis buys 20 per cent of the electricity it supplies through direct purchase agreements with green generators, mainly wind farms. O’Kelly notes that the IEA found that of all the countries that subscribe to the agency (that is, most of the world), the Republic has the third highest level of wind installed on its energy system.

The Government has even bigger plans. It wants 70 per cent of all electricity used here to come from renewable sources by 2030. “I think that Ireland has set ambitious targets,” O’Kelly agrees. “Look at how much has been done over the last half-decade to decade and actually it’s very impressive what Ireland has done in terms of becoming much more renewable, but there’s no doubt that the targets are ambitious.”

Homes and businesses already pay expensive price supports for existing renewable power. The Government intends replacing this with a cheaper version for new projects, theoretically favouring the most efficient, but electricity users will have to go on funding the old scheme as well.

O’Kelly warns that the industry and Government need to be open about the fact that it costs money to move to a low-carbon economy. “There needs to be a level of openness and transparency about the fact that it will cost money to get to this target and ultimately you have be able bring customers along with you in whatever is the scheme behind it.”

Government green ambitions will also put the Republic at the forefront of managing renewable electricity’s intermittency. The wind does not blow at the optimum speed for power generation all the time. Something else is needed to ensure stability in a system using a lot of it, which is where O’Kelly says Bord Gáis comes in.

“That’s where I think natural gas has a long-term future role, in providing the power to help you manage the intermittency. It’s also why Ireland will need to be at the forefront of storage technologies, peaking technologies, but I do see gas playing into that, and interestingly, see Ireland globally leading in that electricity system.”

CV: Catherine O’Kelly

Age: 35

Position: Managing director, Bord Gáis Energy

Family: Married to Ronan with two young children

Interests: Reading – she's just finished Sally Rooney's Normal People – running and hiking. She's preparing to climb Lugnaquillia in a challenge in support of Focus Ireland, which Bord Gáis sponsors.

Something you would expect: She began her career in energy consultancy.

Something that might surprise: She and her extended family go hiking every two years in California's Yosemite National Park.