Corporate Responsibility Performance Review 2 011 Building trust Introduction – Overview 02

Introduction 2011 was a challenging year.   But our integrated business model  proved resilient and our people   delivered a strong result  British Gas service engineer Introduction – Chief Executive’s review 03

Chief Executive’s In the UK, wholesale gas commodity prices due to factors that are impacting the wider rose by 30% during 2011, driven by global energy sector as well as British Gas. review factors including instability in the Middle East and North Africa and the Fukushima nuclear Retail price increases, driven by the As an energy company, 2011 was a challenging year. disaster. In North America, Direct Energy faced wholesale market, coincided with pressure we recognise that our But our integrated business difficult market conditions for the retail energy on household income for many of our business activities impact supply business and continued low gas customers due to the economic downturn. the communities we serve model proved resilient and power prices in our core markets. In the UK, although bills were actually lower and the environments and our people delivered than the previous year, the scale of unit price in which we operate. a strong result. Despite these challenges we made increases driven by factors outside the direct Understanding and good progress implementing our strategy. control of energy suppliers has resulted managing these impacts We continued our programme of investment in public frustration with a consequent will help contribute in diverse energy supplies and low carbon erosion of trust in the energy sector. towards strong, healthy generation, moving closer to producing first societies and sustainable power at our Lincs offshore wind farm in late We are acutely aware that the poor environments for current 2012. 1.7m vulnerable households benefited in economic climate in the UK is impacting and future generations. 2011 from British Gas initiatives that included a household budgets and that any increase Our corporate responsibility discounted tariff, interest free loans and payment in energy prices will cause hardship for approach drives our ability assistance, household grants and free energy some and be poorly received by many. to deliver our business efficiency advice. We have expanded into new We therefore need to do what we can strategy in a sustainable markets in North America, nearly doubling to provide affordable energy. manner. our customer base in the US North East.

One of the most significant ways we help Sam Laidlaw Chief Executive Public perceptions of the energy sector customers manage their energy costs is by are different in North America and the UK. making their homes more energy efficient. In North America, wholesale gas prices have Over the past five years we’ve helped to remained low and Direct Energy has seen a insulate more than 2.5m customer homes healthy improvement in customer satisfaction, in the UK. We continued to promote the as measured by net promoter scores. In the energy efficiency measures that reduce UK, British Gas also saw improving customer bills and also help to cut carbon emissions. satisfaction scores, as well as decreases in And, through our Carbon Emissions customer complaints. Despite these operational Reduction Target obligation we delivered improvements, our brand is less well trusted more than 14.6m tonnes of lifetime carbon than before. Research indicates this is savings in 2011. British Gas was the first Introduction – Chief Executive’s review 04

We’ve embarked on a programme of £500m of internal efficiency savings to be a leaner business and support our competitive position in challenging markets energy company to offer free insulation pricing and strive to explain energy prices tax and regulatory frameworks; and an to our entire customer base and has now more clearly. British Gas launched the Honest improvement in public understanding of the extended this offer still further to customers Conversation in 2011 to explain the factors economics of energy prices leading to a of our partner organisations. behind energy prices to UK consumers restoration of trust in our industry. Centrica and raise the quality of the debate. Not has a central role to play in steering the UK We’ve also embarked on a programme only are commodity costs increasing due towards a future of affordable, secure of £500m of internal efficiency savings to to worldwide growth in demand for oil and and environmentally responsible energy. help minimise operating costs and enable gas, but also more locally, the third party us to continue to offer competitive prices costs we are obliged to pay for transportation, In North America, the precise challenges and products. Regrettably this required distribution and the environmental levies to are different, but our aims are the same – the loss of some 760 jobs in 2011 support renewables and encourage carbon to seek opportunities to grow our business and I am grateful for the co-operation reduction are an increasing component of in a sustainable manner. We will continue and professionalism shown by all of the bill. We look to the Government and the to work with determination to achieve our employees during this process. Regulator to help foster a realistic discussion this wherever we operate. Our people play a vital role in achieving with the British people about energy prices and our goals and the quality of service to the need for major investment to pay for future I look forward to reporting our progress which we aspire. We continue to invest in energy security and lower carbon emissions. to you next year and welcome feedback their careers to develop the skills we need. on our efforts to date. In 2011, we invested more than £20m A significant level of investment is required in our academies and apprenticeships. in the UK energy industry – an estimated £200bn by 2020 – to provide energy security We cannot shield our customers from and lower carbon emissions. Two factors the long-term trend towards higher energy are critical to making this viable: a profitable Sam Laidlaw prices, but we remain committed to fair energy sector operating within stable Chief Executive Introduction – Our approach 05

Our approach Stakeholder engagement and a list of the assured KPIs at Navigating We engage with stakeholders to identify www.centrica.com/CRassurance. our reporting We must understand the impacts we have their concerns, explore solutions and manage on society and the environment. We do relationships. We highlight key engagements Materiality this through engaging with stakeholders, in 2011 throughout this report. We also have Our materiality criteria measures the We have changed the way listening to their concerns, and assessing a Stakeholder engagement summary for concern stakeholders have on an issue we report. Rather than publish our impacts and risks. We have strong 2011 available, which outlines stakeholder in general, combined with the potential all information in one document, governance processes to oversee our concerns and how we responded to them. impact that issue may have on our business. at one time, we now report activities and employ an independent, Based on this, we prioritised 11 issue areas, information in four ways: third-party to review our performance. each of which includes a range of individual Assurance 2011 progress We want stakeholders to be confident issues. The graph below outlines these This document reports 2011 in the performance we report. So we issues across three categories: watch list, Governance progress on our strategic Our Corporate Responsibility Committee asked Deloitte LLP to conduct external significant and priority. and material issues (CRC) oversees progress against our assurance on our most material metrics. CR strategy and activities. The CRC Deloitte used the International Standard This document covers our activities on the  Metrics met three times in 2011. For more on Assurance Engagements (ISAE) 3000 priority and significant issues in 2011, and Our data centre contains all information on committee activities to provide limited assurance on 14 non- refers back to our website where additional our financial and non-financial and topics discussed in 2011, visit financial key performance indicators. information is available on these. We will performance metrics our Governance performance summary. See Deloitte’s assurance statement report progress on our watch list issues on our website through performance updates. Performance updates We will share updates Risk management about projects and initiatives Material issues Centrica Managing the risks to our business in the Responsibility section prioritisation is essential to achieve our strategic at www.centrica.com/cr Vulnerable customers Nuclear Priority objectives. We continue to work to embed Customer trust Climate change social and environmental risk management Background and approach Environment Safety into our existing business risk processes Our CR web pages outline how we approach our key Significant and procedures, to ensure these risks Doorstep selling Energy supply are effectively managed. issues from climate change Community relations to supply chain

Watch list The social and environmental risks that are Supply chain Business ethics most significant to our business are included JOIN THE ENERGY DEBATE in the Risks and Uncertainties summary in Visit our News and Views social

Increasing stakeholder concern Increasing our 2011 Annual Report and Accounts. media platform. Introduction – How we report 06

The 2011 metrics to the left were Key performance indicators assured by Deloitte for 2011 Corporate Responsibility performance reporting.

Metric Unit 2011 2010 2012 Target For the full suite of performance metrics, visit our data centre. For more detailed Net promoter score (NPS) – British Gas(i)(ii) See Basis +26 +24 Achieve a British Gas NPS of +27 by end of 2012 information about the progress we made of Reporting by earning and maintaining customers’ trust and against our commitments in 2011, visit the Progress against commitments. providing the best value in the marketplace

Net promoter score (NPS) – Direct Energy(ii) See Basis +28 +21 Achieve a Direct Energy NPS of +27 of Reporting by end of 2012

Vulnerable households helped Number 1.7m 1.6m Provide support to our most vulnerable customers (i) NPS calculation methodology Customer trust by British Gas initiatives through programmes such as the Warm Home and scope for British Gas has been altered, and the 2011 and 2010 data Discount and British Gas Energy Trust reflect the new approach. (ii) The Direct Energy and British Gas Lifetime carbon savings driven by the Tonnes of CO2 14.6m 15.6m Deliver total lifetime carbon savings scores are not comparable as they Carbon Emissions Reduction Target saved of 15.6m tonnes of CO2 in 2012 are measured differently. (CERT) obligation (iii) EU ETS verified figure. The 2011

(iii) (iv) (v) Group-wide figure is 220g CO2/kWh. UK power generation carbon intensity CO2/kWh 199g 277g 270g CO2/kWh by end of 2012 (iv) Restated to represent 2010 figure (vi) Internal carbon footprint Tonnes CO2e 95,234 100,193 Reduce the global carbon footprint of our existing verified by EU ETS. The 2010 Group- Low carbon (property, fleet and travel) offices, company vehicles and travel by 20% wide figure was 277g CO2/kWh. (vii) by 2015 (baseline year: 2007 ) (v) Our end of 2020 target is 260g CO2/ kWh. We plan to review this target Lost time injury rate (LTIR) Per 100,000 0.25(viii) 0.43(ix) Continue progress in reducing LTIR to 0.225 in the second half of 2012. hours worked per 100,000 hours worked by the end of 2012 (vi) Figure updated following subsequent validation carried out on data. Fatalities Number 0 0 (vii) 2007 baseline has been assured Road safety incident number – high severity Number by Deloitte for 2011 Corporate 10 8 Responsibility performance reporting. Road safety incident rate – low severity Per 1 million 7.5 9.5 Measure only(x) (viii) 2011 figure includes third-party km driven managed contractors for the first time and is not directly comparable with 2010 data. Total recordable injury rate (TRIR) Per 100,000 1.66(viii) 2.13 Continue progress to reduce TRIR to 1.59 hours worked per 100,000 hours worked by end of 2012 (ix) 2010 figure has been restated to include Clockwork Home Services People and safety Retention rate Percentage 89.5 89.9 Measure only data on a proforma basis. (x) In 2012, our road safety measurement Absence rate Days per full- 5.6 6.8 Measure only will be based on avoidable incidents time equivalent per 1 million km driven. A target will not employee be set for 2012 but figures reported in the 2012 Annual Report. Fairness – Overview 07

4 star rating In 2011 Consumer Focus, the organisation that champions the cause of UK consumers, increased our rating for complaints handling from three to four stars out of a possible five



  Treating 

   customers fairly

Excellent customer service lies at the heart of our commitment to customer fairness Apprentice at Dartford Engineering Academy, UK Fairness – Overview 08

Overview Excellent customer service lies at the important for customers who are most heart of this commitment to customer fairness at risk from rising prices. We aim to ensure We are committed to Treating customers fairly and we are continuing to improve customer that even the most vulnerable are able to ensuring that our sales is essential to earn their service levels so that concerns are dealt heat and power their homes by providing and marketing, billing and with promptly and consistently. We are also financial assistance, debt advice and energy other communications are trust. Fairness means being committed to ensuring that our sales and efficiency measures. In the UK, we do open and honest in all our marketing, billing and other communications this through mandatory programmes clear and transparent communications, ensuring are clear and transparent. such as the UK Government’s Warm Home Discount, the Carbon Emissions Reduction that customers can access During 2011, the challenging economic Target (CERT), the Community Energy the best energy deals, climate in the UK put pressure on household Saving Programme (CESP), as well as budgets. Rising energy prices and the through the British Gas Energy Trust and and helping them make impact of increasing government taxes local partnerships. In the US, we offer the cost of their energy on energy bills led to an erosion of trust heating, cooling, and ventilation products more affordable. between customers and the energy industry and services, enabling customers to better as a whole. In North America, the volatility manage their home and business energy of the wholesale market has the biggest costs. Results from different regions impact on customers’ energy bills. cannot be compared due to cultural differences and different methodologies The Direct Energy Customer We want to help customers understand used. For more information, see Ideas Factory helps us to shape and how their bills are calculated and the factors www.centrica.com/nps. change our ideas, gauge reactions that contribute to rising energy costs. While we to big news stories, and get advice aim to pass on price cuts wherever possible, Customer satisfaction on our communications many of the factors that contribute to energy bills are outside our immediate control. Through Providing excellent service consistently is In 2011, we launched the Honest open and honest communications, we can a key commitment for us and an essential Conversation campaign, which invited support our customers in understanding part of our relationship with customers. and comparing energy costs so they always In North America and the UK, we track British Gas customers to tell us what (xi) The Direct Energy and British Gas they think about our services benefit from the lowest tariffs. customer satisfaction levels using net scores are not comparable as promoter scores (NPS), which measure they are measured differently. We launched a Fair Billing Charter Helping customers reduce and manage a customer’s willingness to recommend us. * Assured by Deloitte LLP for the their energy use through energy efficiency 2011 CR Performance Review. for UK business customers designed See www.centrica.com/CRassurance to support small businesses who measures and smart technology enables them In North America, Direct Energy met its to view the assurance statement are struggling to pay their bills to cut their energy costs. This is particularly NPS(xi) target, achieving a score of +28*, and Basis of Reporting. Fairness – Customer satisfaction 09

a significant increase from +21 in 2010. Our US North residential and Ontario In 2011, British Gas’ energy regions, US Home Services and overall NPS score was Clockwork businesses all participated , up from +24 in 2010 for the first time in 2011. This provided +26* a broader picture of customer attitudes across our North American operations. The Direct Energy NPS measures a In North America, Direct combination of contact and brand (referred Energy met its NPS target, to as relationship). However, despite this achieving a score of +28*, overall increase, NPS declined among a significant increase Direct Energy’s business customers as a result of dissatisfaction with contracted from +21 in 2010 energy rates and perceptions about the overall value of energy suppliers.

In the UK, we changed the way we track and report our customer service with NPS by combining the brand NPS we previously reported with a contact NPS. Brand NPS provides a useful insight into the overall perception of the British Gas brand, but it is also driven by factors such as price, over which we have limited control (see pricing feature on page 14). (xi) The Direct Energy and British Gas Contact NPS provides a better view of scores are not comparable as how we interact with our customers and British Gas and Direct Energy NPS Good customer service is one of the they are measured differently. the experience our customers have with scores form part of Centrica’s non-financial main reasons customers are likely to (xii) NPS calculation methodology and scope for British Gas has altered us. We believe the combined score more performance indicators and are reported recommend us, and we aim to continually in 2011, 2010 data has been restated accurately reflects customer satisfaction in our 2011 Annual Report and Accounts. improve this through training for our at the new scope. levels. In 2011, British Gas’ overall NPS(xi) The metrics form part of the non-financial engineers and call centre advisors. * Assured by Deloitte LLP for the score was +26*, up from +24(xii) in 2010. performance measurement within the senior For example, British Gas introduced 2011 CR Performance Review. See www.centrica.com/CRassurance This improvement is despite concerns management Long Term Incentive Scheme training in 2011 that aims to produce to view the assurance statement around increasing energy prices. remuneration package. ‘engineers of the future’ with more and Basis of Reporting. Fairness – Customer satisfaction 10

rounded capabilities and the ability to provide Listening to customers better advice about customers’ energy needs. Listening to customers and responding The British Gas call We will continue to roll out this training in 2012. to their feedback helps us identify areas centre in Cardiff was for improvement. British Gas’ online awarded a silver medal We introduced a range of initiatives to help Ideas Factory allows us to seek customer for improve customer service. We removed time reactions to new and existing service best contact centre targets for the length of customer calls giving and product ideas. in the world at the employees longer to ensure queries are dealt annual World Contact with to customers’ satisfaction. New technical Around 2,500 customers participate in Centre Awards innovations enable customer advisors at the the British Gas Ideas Factory, an online centre to act quickly on customer feedback, panel set up in 2009 to help us understand capture customer comments and offer a call customer responses to new and existing back service. These actions helped the British service and product ideas. We established Around 2,500 customers Gas call centre in Cardiff to win a silver medal the Direct Energy Ideas Factory in late 2010, participate in the British for best contact centre in the world at the annual seeking feedback from both employees Gas Ideas Factory, World Contact Centre Awards. Also, at the and customers. The Ideas Factories help an online panel set beginning of 2012 we launched a videoconferencing us shape and change our ideas, but can initiative called ‘Look Who’s Calling’ that enables also be used to gauge reactions to big news up in 2009 to help us customer service advisors to tailor their approach stories, such as price rises, and to advise understand customer to suit different customer personalities. on the tone, content and design of our responses to new and customer communications. existing service and Our continued participation in the Nectar customer loyalty programme is also an During 2011, we continued to implement product ideas important focus. Nectar members can collect recommendations made by the British Gas points with British Gas which can be redeemed Customer Panel set up in 2010, including through a variety of high street and online making our bills clearer and simplifying tariff retailers. Bonus points are available for Dual structures. We appointed a permanent Fuel customers, submitting regular meter UK Customer Board in 2011 to oversee readings and purchasing additional British our progress. Gas repair and maintenance services. Analysis of our NPS data shows that customers who British Gas also created a new panel are aware of our involvement are more likely specifically for business customers (with to recommend us than customers who are around 1,000 companies represented) not aware of our involvement. as part of our efforts to engage with them. Fairness – Customer satisfaction 11

consumers are less aware of such channels that give customers more control, opportunities. In many markets, government including a home appointment service In 2011, we ended does not actively promote retail energy choice, booked in advance and at the customer’s unsolicited doorstep often communicating it through general convenience, as well as stands at local selling in the UK information on websites. Direct Energy must events and shopping centres. inform consumers about retail energy choice and help them understand their options. Monitoring complaints Through door-to-door sales, sales kiosks and We also track the volume and type other marketing and communications, we try of complaints across our businesses. to help consumers gain the information they In North America, Direct Energy received need to make an informed choice on the best 4,179 total complaints in 2011, down from competitive retail option. All our doorstep sales 5,271 in 2010. in North America have an independent post- sale verification to make sure the customer British Gas’ market share of residential understands and is happy with the product. customer complaints escalated to the Energy Ombudsman declined by 3.6 In the UK, however, consumers are percentage points and Consumer Focus Doorstep selling much more aware of the potential benefits increased our rating for complaints We can improve customer satisfaction of switching suppliers. Although doorstep handling from three to four stars out of a by making sure that our relationship with sales still accounted for a portion of British possible five. We also produce anannual customers is based on trust right from Gas sales in 2011, and our sales practices complaints report, which notes the number the start, and our sales practices play were amongst the best in the industry, of complaints from British Gas domestic an important role in this. feedback from our sales agents and Customer energy customers that we could not Board showed that customers would rather resolve on the same day or the next Doorstep selling has been a common book a home appointment than receive working day after we received them. practice among utilities providers. It can an unannounced visit. Responding to be an effective way to reach customers this feedback, in 2011 we decided to Improving our service for business and raise awareness of the financial end unsolicited doorstep selling in the UK. customers is a particular focus in the UK. savings and service offerings they can Our decision was supported by broader After self reporting, the regulator, Ofgem, obtain by changing suppliers. research conducted by Consumer Focus, undertook an investigation that resulted in a UK organisation that champions consumer a fine of £2.5m for the way British Gas This is particularly important in our North interests, which showed that many customers dealt with complaints from small business American markets, where switching find doorstep selling old-fashioned and customers. With millions of customer suppliers is not actively promoted and intrusive. Instead, we have introduced sales interactions every year, some complaints Fairness – Clear communications 12

are inevitable, but we recognise the need In the UK, billing is one of our main to handle them better. We have invested £4m communication channels with customers. In North America, we aim to upgrade our complaints handling systems, The price of energy is a particularly to ensure our marketing processes and training. important focus for UK consumers and communications are clear we aim to communicate clearly about and honest, in line with Clear communications this (see feature on pricing, page 14). Direct Energy’s ‘Simple, We communicate with customers regularly In 2011, we launched the Honest Friendly, Direct’ culture through our bills, marketing, websites and Conversation campaign, which invited call centres. Making these communications British Gas customers to tell us what clear, open and honest is an important they think about our services (see feature part of treating our customers fairly by on the following page). As a result, British ensuring they have the information they Gas improved the layout of bills and need to make informed decisions. reduced the number of tariffs for residential customers to make it easier to understand In North America, we only bill customers directly how bills are calculated and compare in two of our 25 markets (Alberta and Texas), costs. We now only have two types of meaning our communications with potential tariff – fixed and variable – and we are and existing North American customers are exploring how we can further simplify primarily through marketing. We aim to ensure the two-tier pricing structure. We also our marketing communications are clear and provide a simple tariff checker on the honest, in line with Direct Energy’s ‘Simple, British Gas website so customers can Friendly, Direct’ culture. see if they are on the best tariff for their needs. In early 2012, we committed to include a tariff comparison table on Market share of complaints to the energy Ombudsman – customers’ annual energy statements British Gas which will enable customers to see if they are on the best tariff. 2011 2010 2009 British Gas residential customer complaints 13.2% 16.8% 15.6% We have also made it easier for to energy Ombudsman as percentage customers to change payment details, of industry totals compare energy usage with others in their local area and submit meter Market share of customers 32.5% 32.8% 32.5% readings online. Our efforts were Fairness – Clear communications 13

The Honest Conversation recognised by the comparability website uSwitch, which named British In November 2011, British Gas Managing Director Phil Bentley sent a letter Gas the winner of the Best Online Services to residential customers inviting them to contact him directly with the aim category in the 2011 uSwitch Energy of establishing an Honest Conversation. Within three months he had received What our customers Awards. 8,300 responses, including suggestions on around 2,500 individual topics are saying In 2011, we launched a Fair Billing which we will use to help us improve our performance. The most frequently Charter for UK business customers raised topics were energy prices, billing and customer service. In view of the very large designed to support small businesses profits made by the energy who are struggling to pay their bills. suppliers in this country, The Charter aims to put small business We have introduced a series of initiatives there is no chance of customers in control of their energy targeting these issues, including simplified improving your image use and ensure they are not hit by big tariffs, processes to help customers make until the most vulnerable ‘back bills’ caused by errors beyond their sure they are on the right tariff, and a in our society are not control. By 2014, we have committed facility that allows customers to book placed at risk of dying from to phase out charging small business a call back rather than waiting on the line. hypothermia due to the high customers in arrears for more than We are also looking to improve the way we salaries and profit margins one year’s energy use as a result of communicate with customers through bill required by the executive inaccurate billing, as we have already design and annual statements. To continue staff of your company. done for residential customers. the Honest Conversation, we will send out further letters telling customers about what Hats off for a brilliant we are doing and we will also provide letter. How nice to be spoken more information on energy bills. to by the MD in person and in a straightforward way. Much of the initial focus on the Honest Keep it up. Conversation in the media, the UK Government and with external stakeholders has been on energy prices, as well as the complexity and lack of clarity around our pricing and tariff structures. We have responded quickly in these areas but as we analyse different aspects of the Do you want to be part of the conversations we have had, we will explore Read more customer Honest Conversation? Click here ways of building trust on other issues. feedback on our website Fairness – Clear communications 14

Electricity Energy pricing in the UK: External costs Our costs How it works A B C D E There are a number of ways we can help We aim to be transparent about the relationship between wholesale energy to limit the impact of price rises and prices and what customers pay. But energy prices, our role in managing them, volatility for our customers. and how we can protect customers from price fluctuations, remains complex. Like most energy companies, Centrica buys a significant proportion of its gas 38% 26% 19% 12% 5% The images to the right show a breakdown bills is limited because our operating costs supplies in advance, usually around six A. Bought from the wholesale market of the different factors that contribute to account for only around 12% of the average months ahead, but in some cases up B. Delivery to your home energy costs – we include similar diagrams electricity bill and 8% of the average gas bill. to two years. Known as ‘hedging’, this (regulated by Ofgem) on customers’ bills. By far the largest practice allows us to manage price volatility. C. Government obligations and taxes contribution to bills is the wholesale cost The wholesale cost of the energy accounts While purchasing energy in advance can (inc. Green Levies and Social Support) of the energy itself. The remaining costs for 38% and 56% of the average electricity guarantee future supplies, the price can D. Operating costs include our obligations under mandatory and gas bill, respectively. We have very little change on the day of delivery (known as E. Our profit Government energy efficiency and rebate control over this cost, which is influenced by the spot price). This means we can face schemes, distribution costs via the national and global trends. In 2011, the UK a cost saving or increase, which may then Gas National Grid, operating costs (the cost imported more than 50% of its gas and this be passed on to customers. However, a lag External costs Our costs of running our business) and profit. will increase to 75% over the next 10 years. exists between increases or reductions in This means we are increasingly competing the wholesale market and corresponding A B C D E After tax, our profit margin is around 5% internationally for available supplies. With changes to customer bills because the of customer bills, which we use to meet gas-fired power stations accounting for 40% impact of wholesale changes isn’t realised our duty to shareholders and reinvest of the UK’s electricity generation, high gas until the energy is delivered. into the business. Ensuring our business prices also have a direct impact on remains profitable is essential to attract electricity prices. While we are making our operations more investors, invest in future growth and efficient, and protecting customers from secure the UK’s energy needs. We aim Wholesale gas prices remain highly volatile, energy price volatility through hedging, 56% 21% 10% 8% 5% to minimise the cost of running our while rising global demand is leading to one of the biggest contributions we can A. Bought from the wholesale market operations so we can pass on savings an overall upward trend. The wholesale make to reducing energy bills is by helping B. Delivery to your home to customers where possible. With this gas commodity price rose by 30% in 2011, customers cut the amount of energy (regulated by Ofgem) in mind, we are working to make our driven in part by events such as the Fukushima they use through efficiency measures C. Government obligations and taxes operations more efficient, although the nuclear disaster in Japan and the political and smart energy management. This is (inc. Green Levies and Social Support) potential impact on customers’ energy upheaval in North Africa and the Middle East. discussed in more detail on page 24. D. Operating costs E. Our profit Fairness – Supporting vulnerable customers 15

Supporting than regulated energy companies. We have vulnerable customers worked with these organisations to improve the communication of programmes to 1.7m customers, and to enhance and streamline The challenging economic environment, the processes that coordinate support. In the UK, our vulnerable coupled with rising fuel prices, is affecting When we become aware of a vulnerable both residential and business customers. customer, we work with them to arrange customer initiatives The most vulnerable are often the hardest flexible payment schemes. benefited1.7m hit, as energy costs account for a higher households (1.6m in 2010) proportion of their income. British Gas defines vulnerable customers as those who are unable to safeguard We remain committed to supporting their personal welfare or the personal those most at risk and offer a range welfare of other members of the of products and services tailored to household, for reasons of age, health, support vulnerable customers. disability or severe financial insecurity.

In North America, deregulated markets In Texas, Direct Energy directly supports In the UK, an estimated 5.5m households mean prices are subject to variability vulnerable customers through our Neighbor- live in fuel poverty (defined by the UK at the national level for gas and the to-Neighbor bill assistance programme, Government as those that need to spend regional level for electricity. While gas and made a $431,871 contribution in 2011 – more than 10% of household income prices have been relatively low since a 14% increase from 2010. The funds helped on fuel to adequately heat their homes). 2008, household electricity bills in more than 5,900 customers in 2011 with grants However, a new definition for fuel poverty the US have increased more than the of up to $600. These are distributed through is being considered by the Government, rate of inflation for the past five years. approximately 30 community organisations following recommendations from the Hills In Texas and Alberta, the two regions that assessed the level of need against the Report released in March 2012. The report where we have a direct relationship Texas Center for Public Policy Priorities’ is encouraging a definition that better with our customers, when we see that definition of poverty. Direct Energy customers considers the three main drivers of fuel customers may be exposed to peaks are encouraged to help neighbours in need poverty: income, energy price and the in costs, we proactively contact them by donating to the bill assistance programme cost to heat the home (which could reflect to offer options to pay their bills over through their monthly bill. poor energy efficiency). a period of time or to change the * Assured by Deloitte LLP for the type of product they receive from us. In Alberta, vulnerable customer support British Gas’ vulnerable customer initiatives 2011 CR Performance Review. See www.centrica.com/CRassurance This applies to our residential and is provided through governmental and benefited 1.7m* households in 2011, to view the assurance statement small business customers. non-government organisations, rather up from 1.6m in 2010. These initiatives and Basis of Reporting. Fairness – Supporting vulnerable customers 16

included a discounted tariff, free debt to benefit from our Essentials social tariff energy supplier and represents more than and payment assistance, energy and but we closed new registrations to the our equivalent market share of spend. In 2011, the British Gas household grants, free energy efficiency tariff following the introduction of the UK Energy Trust funded advice, products and services. In 2011, Government’s mandatory Warm Home We are now transferring existing Essentials the establishment of more than 340,000 customers continued Discount Scheme. Under the new scheme, customers onto the new programme and Energy Debt Advice UK energy suppliers are required to spend a identifying additional customers who fit 14 combined £250m in 2011/12 (rising to £310m within our broader group criteria. Essentials Centres in collaboration by 2014/15) to provide assistance with energy tariff customers will continue to benefit with a range of advisory Warm Home Discount costs for vulnerable customers throughout from their reduced tariff during 2012 until organisation partners eligibility criteria England, Scotland and Wales via a one-off we transition them across to the Warm across the UK rebate payment (£120 in 2011/12). Home Discount, subject to eligibility. (Year 1: April 2011 – March 2012) The Warm Home Discount scheme Our other mandatory obligations include Core separates eligible households into two groups the UK Government’s Carbon Emissions  Targeted at very low income – the ‘Core’ group and the ‘Broader’ group. Reduction Target (CERT) and Community pensioners claiming a subset Households in the Core group, which are Energy Saving Programme (CESP), which of pension credit. For the identified as the most vulnerable, automatically support customers in reducing their energy 2011/12 scheme the scheme receive the discount on their electricity bill costs through the installation of insulation was for Households in receipt without having to take any action. and other energy efficiency measures. of guarantee element CERT requires suppliers such as British Gas of Pension Credit Suppliers can set their own broader group to deliver carbon reductions by providing Broader Households: qualifying criteria under Government energy efficiency measures to households.  On a very low income Guidelines and British Gas has the widest in In total, 40% of CERT savings must be plus the industry, enabling us to support a greater delivered to ‘priority’ vulnerable and low-  – over the age of 60, or number of households (see box to the left). income households which includes 15% – a household with a child We are the only supplier who committed to that must be delivered to a ‘super priority’ under the age of 5, or pay the Warm Home Discount for Year 1 to group identified as households considered  – a member of the household all customers who meet the eligibility criteria to be at a high risk of fuel poverty. CESP living with a physical or mental and applied before the end of January 2012. is a similar energy efficiency scheme that illness, or helps vulnerable customers by targeting  – households on very low We have provided more than 280,000 socially deprived areas. In 2011 our CESP income where the household eligible British Gas customers with the programmes benefited more than 8,800 spends greater than 10% of £120 rebate for the 2011/12 winter period. homes. (For more on CERT and CESP, the total income on energy This is considerably more than any UK see Low carbon, page 22). Fairness – Managing energy costs 17

£20m into the British Gas Energy Trust For business customers, British Gas’ for 2011/12, and extended grant support Small Business Advice and Expertise for individuals and families to non-British Service (SAVE) has helped more than 5,000 Gas customers. business customers reduce their debt by I think it’s always easier a total of £15m since its launch in 2010. if you know that every In 2011, the Trust funded the establishment The scheme responded to 17,000 enquiries time the bill comes in it’s of 14 Energy Debt Advice Centres through in 2011 from small businesses seeking going to be right. So you organisational grants, in collaboration with advice and support on keeping up with their don’t have to worry about a range of advisory organisations across energy bills, a 79% increase from 2010. checking it and submitting the UK. The Centres provide free face-to-face It is managed by the British Gas Expert a meter reading or anything advice and support to both British Gas Credit Solutions Team that offers businesses like that. customers and the wider public struggling to financial and energy saving advice and can On top of our participation in mandatory pay energy and other household bills, as well arrange extended repayment plans for David, 35 programmes, we support vulnerable as assistance in applying for grants from the businesses with large amounts of debt. Birmingham customers through voluntary initiatives. British Gas Energy Trust. Four of the Centres In 2011, British Gas maintained its are being managed by Citizens Advice Bureau Helping customers commitment to working in partnership (CAB), with the remaining Centres managed with a number of organisations to address by other independent advisory organisations. manage energy costs community fuel debt issues, and we are British Gas has also funded 40 training broadening the scope of our support courses through National Energy Action, Reducing energy costs is a priority for all to include energy efficiency measures, which will train 600-800 community advisors our customers, not just those considered and to transition to a more local focus. on fuel debt and energy efficiency advice to be vulnerable. The best way to at a grassroots level. manage energy costs is to use energy For example, we are working with Carers more efficiently. UK and RNIB to identify customers British Gas is also supporting CAB’s Energy who would benefit from free loft and Best Deal, which will ensure that consumers We offer a range of products and services cavity wall insulation in their properties. and frontline staff who work with people that help customers manage and reduce This supports our CERT obligations at risk of fuel poverty have the knowledge their energy use, including insulation and for vulnerable customers, and particularly to hand to make the right decisions about energy efficient appliances. British Gas the ‘super priority’ group. British Gas tariff choices, supplier choices, and energy customers who installed energy efficiency has also taken steps to increase the efficiency measures. Helping customers make measures such as insulation and energy level of support we offer to individuals sure they are on the right tariff emerged as efficient boilers saw a 44% fall in gas (xiii) Compares the usage from November 2008 through October 2009 and households in debt, in addition to a clear priority through British Gas’ Honest use between 2006 and 2010, saving with usage from December 2009 regulatory requirements. We invested Conversation in 2011 (see page 13). an average of £322 a year. A survey through November 2010. Fairness – Managing energy costs 18

is leading the introduction of smart meters that put customers in control We launched our of their energy use by showing them insulation business in how much energy they consume and the UK in 2010, and in where they can cut down. Evidence shows 2011 delivered more than that smart meters can increase customer interest in installing energy efficiency 400,000 loft and cavity measures by showing how much they wall installations, doubling are spending on energy in real time. the number of installations in 2010 and helping us to In North America, where most markets lack mechanisms to encourage the meet our CERT obligation introduction of energy efficiency and microgeneration technologies, Direct Energy offers a variety of energy tariffs to help customers manage costs. In the North East of the US, we introduced a new time of use product called ‘Free Saturday’, enabling customers to save money based on when they use energy. In Texas, many customers welcomed a prepaid product called Power-to-Go.

Demand-side management products, which help to manage the demand on of more than 100,000 customers using improvements customers can make. the grid at peak times, are becoming EnergySmart (see page 25) shows We launched our insulation business in more popular particularly among our average gas use was cut by 3.6% and the UK in 2010, and in 2011 delivered more business customers in North America. electricity consumption was down 4.1%(xiii). than 400,000 loft and cavity wall installations, For more information, see Low carbon, doubling the number of installations in 2010 page 25. We are building capacity to offer these and helping us to meet our CERT obligation. solutions through our growing energy By helping customers reduce their energy services business. Insulation is one of We are also increasing our smart metering use, we are helping them cut their carbon the most cost effective energy efficiency and microgeneration capabilities. British Gas footprint as well as their costs. Low carbon – Overview 19

14.6% Of the power we generated in 2011, 14.6% was from renewable sources



Low 

carbon  As an energy provider we have a big  role to play in decarbonising power  generation and helping to change  the way consumers use energy Lynn and Inner Dowsing Wind Farms, UK Low carbon – Overview 20

Overview There is still no agreement globally on take on climate and energy policy. reducing greenhouse gas emissions, despite Direct Energy continued to work through Government targets Climate change is one some progress made at the United Nations organisations such as the Business Council to cut greenhouse gas of the biggest challenges climate change talks in Durban at the end of for Sustainable Energy, the Alliance to emissions have been 2011. This means the onus is now on national Save Energy and the Energy Efficiency facing the world. As an and regional governments to devise their Coalition to encourage the US Government set at the European energy provider we have own regulatory frameworks. In North America, to support funding and tax credits for and UK levels, and an important role to play lowering carbon emissions is still not high energy efficiency measures. Centrica is committed on the agenda among governments or the to contributing to efforts in addressing this challenge public. The US remains the only signatory At the same time as governments continue by decarbonising power to the Kyoto Protocol not to have ratified it, to face these challenges, consumers’ to meet these targets and Canada announced its formal withdrawal concerns about climate change are being generation and helping to from the Protocol in December 2011. pushed down their list of priorities as they change the way consumers struggle to balance household budgets. use energy. Government targets to cut greenhouse An Ipsos MORI poll found that the proportion gas emissions have been set at the European of British adults viewing climate change as and UK levels, and Centrica is committed to a priority declined by 16% between 2009 contributing to efforts to meet these targets. But and 2011. A priority for us is to make sure We scaled up our solar business in tough economic conditions are making it harder customers realise that energy efficiency 2011, installing solar panels in 2,377 for governments, industry and consumers to measures that cut carbon emissions also homes which can collectively provide prioritise investment to address climate change help to reduce their bills. 12.8MW of power at peak capacity in the face of austerity measures. We are one of a number of businesses seeking clarity Despite these challenges, action is still British Gas is an industry leader from governments on the long term regulatory needed to tackle climate change. To make in the installation of smart meters framework to help meet emissions targets. any significant progress on climate change and has already fitted more than 80% goals, a wide range of stakeholders must (453,907) of the UK’s total In June 2011, for instance, Centrica work together, and it is clear from opinion was among 74 major European companies research that people look to companies In 2011, our absolute emissions calling on the European Union to adopt a 30% such as Centrica to lead the way. emissions reduction target by 2020 based fell to 7.7m tonnes CO2e from on 1990 levels. In Canada, Direct Energy was We are doing this in three ways: helping 10.7m tonnes CO2e in 2010, with the decrease attributable to putting part of a coalition of energy companies and customers cut emissions from energy use, four of eight gas-fired power non-governmental organisations presenting investing in producing energy from low stations into standby mode a series of actions that government could carbon sources, and reducing our own Low carbon – Customer carbon 21

this and is available online. Helping our residential and business customers manage their energy use and providing £3bn opportunities for them to generate their own energy from renewable sources We have invested more are among the most important ways we can contribute to a low carbon future. than £3bn in the last three years in lower carbon In the UK, where most of our efforts power generation on carbon reduction are focused, we concentrate on three areas: energy efficiency, microgeneration and smart technologies.

British Gas’ team of almost 13,000 engineers is playing a critical role in making new technology and products available to our customers. In 2011, we recruited 941 additional people to train at our network of academies, supporting the rollout of our low carbon products and services. We plan to hire at least another 450 during 2012. internal carbon footprint. Our efforts are generation and currently have a number mainly focused on the UK, where market of offshore wind farm projects in the pipeline. In North America, the market lacks and government support for low carbon We are also cutting emissions in our own mechanisms in certain states to encourage measures is better established. operations, as well as identifying opportunities the introduction of solar and other where further savings can be made. microgeneration technologies. Incentives We are making good progress providing do exist for high efficiency air conditioners energy efficiency measures that help Customer carbon and furnaces, and Direct Energy is having British Gas customers use less energy. success providing these products. Through Our carbon intensity is one of the lowest By far the largest proportion of carbon the Clockwork Home Services acquisition, of the major power generators, we have emissions from the energy industry comes Direct Energy has also been able to invested more than £3bn over the last from the gas and electricity used by expand the service of installing these three years in lower carbon power consumers. Our carbon map shows types of equipment. Low carbon – Customer carbon 22

All these measures can help to keep bills and related carbon emissions – are cavity down for customers, making energy more wall insulation, energy efficient boilers, affordable both in the short and the long term and loft insulation. 7.9m (see Treating customers fairly, page 7). In 2011, British Gas was the first energy In 2011, the insulation Energy efficiency company to offer free insulation to our entire Making improvements to energy efficiency customer base and have now extended we delivered achieved is one of the most effective ways of reducing this offer still further to customers of our carbon savings of 7.9m

carbon emissions in the home and workplace. partner organisations. We are the only tonnes of CO2 emissions The three measures that make the biggest energy company to have invested in building reductions in a customer’s gas use – our own insulation business, which now employs more than 1,000 people. In 2011, British Gas energy efficiency installations the insulation we delivered achieved carbon savings of 7.9m tonnes of CO2 emissions. 2011 2010 The UK Government sees domestic

Measures CO2 savings Measures CO2 savings and commercial energy efficiency as

(millions) (tonnes CO2) (millions) (tonnes CO2) key to meeting its carbon reduction Insulation 0.4 7.9 0.2 3.7 target of 80% on 1990 levels by 2050, and has regulated accordingly. The main † Energy efficiency products 3.7 2.2 2.1 1.5 domestic energy saving schemes are Energy efficient light bulbs 13.7 1.9 24.6 3.5 the Carbon Emissions Reduction Target Other measures‡ 5.7 2.6 17.1 6.9 (CERT) and the Community Energy Saving Programme (CESP). TOTAL 23.5 14.6 44.0 15.6 CERT requires suppliers such as British Gas † Includes items such as energy to deliver carbon reductions by providing (electricity) monitors, standby savers CESP and CERT progress energy efficiency measures to households and water widgets. – including insulation, boilers, energy efficient ‡ Measures in this category include DIY loft 2011 2010 insulation m2, energy efficient glazing 2m , light bulbs, home appliances and energy heat pumps, fuel switches, boilers, and Tonnage of carbon delivered under CESP (cumulative) (million tonnes CO2) 1.4 0.45 saving devices. CESP is an obligation on UK home energy audits. CO2 in this category power generators and energy suppliers to is also derived from an undisclosed Lifetime carbon savings – UK household energy efficiency products 14.6 15.6 number of energy efficient domestic install energy efficiency measures in areas of appliances, which would not have been provided under CERT (million tonnes CO2) severe social deprivation in partnership with brought to market without CERT funding. Low carbon – Customer carbon 23

Future regulatory support for local authorities and social housing low carbon services in the UK providers. It takes a ‘community-by- community’ and ‘whole house’ approach, which means working to make an entire CESP and CERT are due expire at the end of December 2012 building or street more energy efficient and the UK Government plans to replace them with the Green Deal rather than just a single property or and Energy Company Obligation (ECO). These programmes will apartment (see page 15 for more on provide us with further opportunities to engage the millions of homes support for vulnerable customers). that have yet to take advantage of energy efficiency measures. In 2011, we launched 45 CESP schemes across 40 low income areas, delivering during 2011, following acquisition in 1.4m tonnes of equivalent carbon savings, December 2010 of external wall insulation achieving a 211% increase on 2010. experts ECL Contracts. Under CERT we provided household energy efficiency products with equivalent British Gas has been an early and lead lifetime carbon savings of 14.6m tonnes proponent of the Green Deal. We launched in 2011, below our internal target of our trial Green Deal programme – the 16.3m tonnes. Having put considerable Home Energy Plan – at the start of July effort into building an insulation business 2011. The Home Energy Plan enables and finding households suitable for British Gas customers who pay by direct insulation, we were disappointed to debit to take out low cost loans to invest in miss the target. However, we believe energy saving measures such as insulation that industry CERT targets, extended to and new boilers, or small scale renewable 31 December 2012, were set at unrealistic The Green Deal will enable domestic energy generation through, for example, levels by the UK Government; a view and commercial customers to invest solar PV. The loans are offered over five, reflected within the industry. Along with in energy efficiency improvements 10 or 15 years, and the repayments must other suppliers, we are engaged in ongoing for no upfront outlay by spreading the be less than the savings made. discussions with DECC, focused on cost of the measures over several years delivering greater flexibility in how the through instalments on their energy bills. By choosing to introduce the Green Deal obligations can be met. In parallel, the ECO will provide additional early, we are helping to identify challenges support for solid wall insulation and and opportunities for the programme’s full We continue to grow our insulation investment to reduce energy bills for fuel scale implementation, and we are sharing business, having funded more than poor households. British Gas has built our findings with the UK Government to 410,000 domestic insulation jobs. a strong foundation in solid wall insulation support others taking similar measures. Low carbon – Customer carbon 24

Ground and air source heat pumps on their use. British Gas is one of the four use energy from the ground and the air lead partners in the Customer Led Network to provide heat to homes and businesses. Revolution (CLNR), the UK’s biggest smart 2,377 They are expected to be a key part of the UK’s grid project. The three-year project was microgeneration sector by 2020. To position established in 2011 to assess how low We scaled up our ourselves well for this growing market, we carbon and microgeneration technologies solar business in 2011, acquired the heat pump company Cool Planet such as solar PV panels, electric vehicles installing solar panels in 2010. We grew its revenue from £500,000 and heat pumps affect the electricity grid in 2010 to £2m in 2011. and how any challenges can be overcome. in 2,377 homes which CLNR is also creating smart-enabled can collectively provide Small scale biomass boilers enable customers homes to give customers more control 12.8MW of power at to generate their own heat from renewable over how they use and generate electricity. peak capacity sources rather than fossil fuels, reducing their The CLNR is a £54m project that has impact on climate change. Anticipating an received £27m funding from the £500m increase in demand following the launch of the Low Carbon Network Fund, which was Renewable Heat Incentive in 2011, we acquired established by the UK energy regulator Microgeneration the remaining stake in Econergy. As a leading Ofgem to support the development of Microgeneration is the process of biomass heating provider, Econergy enhances smart grid technology and assist in the generating low carbon energy from relatively our ability to install biomass boilers in homes, creation of a low carbon economy. small-scale, and usually renewable sources. businesses and commercial industries. Proven methods include rooftop solar Smart energy panels, air and ground source heat pumps We believe that new technologies can play Smart energy technologies are about and biomass boilers and we are expanding a significant role in decarbonising energy making people more aware of their energy our ability to provide these solutions. generation and we are supporting research consumption. At the forefront of these

We scaled up our solar business in 2011, Microgeneration installations installing solar panels in 2,377 homes. We also performed larger scale projects such 2011 2010 as an installation at Toyota’s Burnaston car plant. Collectively, we have put in place Installations Generation Installations Generation 12.8MW of solar PV capacity, compared (No.) capacity (MW) (No.) capacity (MW) with 428 installations in 2010 (1.8MW). In Solar PV 2,377 12.8 428 1.8 2011, we paid a Feed-in-Tariff to around Heat pumps 326 2.25 N/A N/A 20,000 of our customers. Low carbon – Lower carbon power 25

technologies are smart meters, which This does not reflect any changes in The market for electric vehicles continues provide real-time information on energy use our commitment to deliver in this area. to grow with manufacturers offering a to the customer. British Gas is an industry range of electric cars and vans. British Gas leader in the installation of smart meters and Putting smart meters into every home and is supporting the emergence of electric 163 has already fitted more than 80% (453,907) business will take years – the UK Government vehicles and is the preferred supplier of the UK’s total. Our work so far indicates is targeting for this to be complete by 2019. of home and work charging stations On average, users cut that having access to energy use information So, for customers with traditional meters, for Nissan, Renault and Hitachi Capital. gas use by 3.6% and facilitates behaviour change among British Gas has developed the EnergySmart We’re on track to be the largest installer consumers, with 80% of our customers package, which provides a free electricity of electric vehicle charging points in UK electricity consumption stating that smart meters have made them monitor showing electricity consumption, homes, supporting 70% of the domestic by 4.1%, which produces think differently about their energy use and costs and carbon emissions. Our survey in market in 2012. a total carbon savings 64% saying that they have undertaken 2009/10 of more than 100,000 customers of approximately energy efficiency improvements in their using EnergySmart has shown that the While smart metering and energy home since the smart meter installation. EnergySmart package can reduce energy management in the home are not yet 163kg CO2 use by as much as 12%. On average, users widely taken up in North America, demand- Technology is developing rapidly, with have cut gas use by 3.6% and electricity side management products – those new models of smart meters offering consumption by 4.1%(xiv), which produces that help to manage the demand on the better functionality. To ensure that our total carbon savings of approximately grid at peak times – are becoming more meters continue to be at the forefront 163kg CO2. popular, particularly among our business of this technology, we have adjusted our customers. These provide customers with original target to install 2m smart meters Additionally, British Gas has launched safety payment incentives for pledging to and down to 1.1m meters by the end of 2012. and security monitoring devices for customers’ actually reducing energy usage at peak This reduced target will help us focus on homes that are wirelessly connected to the times to decrease the stress on the grid. delivering the latest technology and avoid internet, as well as ‘SmartPlugs’ that measure By providing these products, we have installing large quantities of older models consumption and can be used to turn off lights enabled customers to receive over $3m that may quickly become obsolete. and appliances remotely to save energy. in incentive payments, some of which has been used to fund internal energy Smart meter installations monitoring infrastructure improvements and implement efficiency measures.

Unit 2011 2010 Lower carbon power Smart meters installed Number of meters installed 453,907 260,351† (xiv) When comparing usage from November 2008 through October (cumulative since 2009) As an energy producer, we can play 2009 with usage from December an important role in the move towards 2009 through November 2010. † 2010 total restated as a result of an internal audit review of the installation data. Low carbon – Lower carbon power 26

a low carbon future by cutting carbon Carbon intensity emissions from power generation. We measure progress towards our 7.5mt CO2 ambition to decarbonise energy production Most electricity is generated by burning by monitoring the carbon intensity of the Total CO2 avoided through fossil fuels, one of the main contributors power we generate. Carbon intensity our renewable and low to climate change. Gas will remain part of is measured in grammes of carbon dioxide carbon generation the energy mix because of its relative low emitted per kilowatt hour (g CO2/kWh). cost as a fuel source for power generation. This includes the carbon emissions from It also emits less carbon than other fossil fuels all our own generation facilities and through and provides good flexibility for backing up site-specific power purchase agreements more intermittent forms of generation such we make with third parties. as wind. In 2011, we reduced our Group carbon

A metric we use to measure the impact intensity by 21% to 220g CO2/kWh (xv) of renewable and nuclear generation on (compared with 277g CO2/kWh in 2010). delivering lower carbon power is the amount This decrease was strongly driven by (xv) Restated to represent 2010 figure of carbon avoided (see table below). This is UK carbon intensity performance, which verified by EU ETS. (xvi) EU ETS verified figure. a calculation that measures the difference showed a 28% reduction to 199g CO2/ (xvi) * Assured by Deloitte LLP for the between the carbon emitted from renewable kWh* (compared with 277g CO2/kWh in or low carbon sources compared to what the 2010). UK performance was due to the 2011 CR Performance Review. See www.centrica.com/CRassurance emissions would have been had the electricity first full-year contribution of nuclear power to view the assurance statement been purchased from third parties. from our 20% stake in EDF Energy Nuclear and Basis of Reporting.

∂ Carbon avoided is calculated using the 2010/2011 Fuel Mix Disclosure data. CO2 avoided through our renewable and low carbon generation † These figures include power generation from all wholly owned assets and all other Amount generated ∂ assets from which Centrica is entitled CO2 avoided (GWh) to output under site-specific contracts. (million tonnes) Excluded are any Purchasing Power Agreements that are not site-specific, 2011 2010 2011 2010 i.e. contracts that could be settled Renewables† 5,629 4,890 2,536,033 2,139,564 from the open market. ‡ Nuclear 11,074‡ 6,717 4,977,708 2,924,801 This figure represents generation minus output lost during transmission. As such it differs from generation TOTAL 16,703 11,607 7,513,741 5,064,365 output on page 33. Low carbon – Lower carbon power 27

Generation and the effect of placing four from our own generation and from site-specific of EDF’s nuclear power stations in the UK. of our eight gas-fired stations into standby offtake contracts), 14.6% was from renewable We are also working with EDF on a joint Our portfolio of gas, mode. For more information on our sources. In addition, 29% was from nuclear, venture in the UK in which we have the nuclear and wind power carbon intensity, see our carbon intensity resulting in a total of 43.4% produced from option to bring online a new generation works together to deliver briefing note. low carbon sources. of nuclear power stations (see Energy a diverse range of energy supply, page 30). Because Centrica’s power generation We already have a strong presence in sources while maintaining does not meet all our customer demand offshore wind and are expanding our portfolio As a consistent source of power that a reliable energy supply we have to purchase the difference on the by building the 270MW Lincs offshore wind can be turned on and off as needed, wholesale energy market. While we know farm off the Lincolnshire coast. It is expected gas-fired power stations also provide how much carbon is emitted by our own to produce first power later in 2012 and to be the flexibility needed to back up renewable generation, to allow us to calculate our total fully operational in 2013, providing electricity energy such as wind, which offers carbon emissions accurately we need to for 200,000 homes. We await consent an intermittent supply. know what type of generation has delivered decisions on two proposed projects at Race the power that we have purchased on Bank and Docking Shoal, which if approved Our Langage gas-fired power station, the wholesale market. This information is would provide enough power for 380,000 opened in 2010 near Plymouth, is one provided annually by the UK Government and 360,000 homes respectively. Of greatest of the most efficient of its kind in the UK, as ‘fuel mix disclosure’ figures. Analysis significance is the potential from our Round thereby minimising associated emissions. of our total fuel mix versus the UK average 3 portfolio of projects in the Irish Sea Zone Following a review of our remaining gas- as reported in the Government’s Fuel that we are co-developing with joint venture fired power stations at the end of 2011, Mix Disclosure figures shows that for partner DONG Energy. Subject to consent we announced in March 2012 the the financial year 2010/11 our fuel mix and investment decisions, the zone may closure of our older and less efficient disclosure intensity was 338g CO2/kWh provide up to 4.2GW in capacity, sufficient King’s Lynn station. (down from 416 in 2010) compared to a UK to power up to three million homes. average of 450g CO2/kWh. This places us Absolute emissions second among the ‘big six’ energy suppliers. Biomass presents new opportunities for We also measure our absolute us to build our renewable energy portfolio. emissions, which include emissions We are exploring the potential for a new from our power generation. We have (xvii) This figure has been restated Energy mix from the 2011 Annual Report Our portfolio of gas, nuclear and wind biomass power station in the UK and are limited influence because we cannot and Accounts due to subsequent power works together to deliver a diverse committed to using sustainably sourced simply cut power generation to reduce verification of the data. range of energy sources while maintaining biomass (see Energy supply, page 30). emissions since we have a responsibility (xviii) This is an updated figure to that a reliable energy supply (see Energy to provide electricity for our customers. reported previously and in the 2011 Annual Report and Accounts following supply, page 30). Of the power we Our 20% stake in EDF Energy Nuclear In 2011, our absolute emissions fell subsequent validation carried out (xvii) (xviii) generated in 2011 (including output Generation provides us with a 20% offtake to 7.7m tonnes CO2e from 10.7m on data. Low carbon – Managing our footprint 28

tonnes CO2e in 2010, with the decrease We measure emissions relating to our We also run campaigns to raise Breakdown of internal attributable to putting four of eight gas- own operations by calculating our internal environmental awareness and encourage carbon footprint 2011 fired power stations into standby mode. carbon footprint. This encompasses emissions greener behaviours in our buildings. from office energy use, company vehicles, Both our business and our markets’ energy and business travel. This is different from our Our Group target is to cut the annual demands are projected to grow, which absolute emissions, which include emissions carbon footprint of our ‘core’ business is likely to increase our emissions in the from our power stations, upstream oil and by 20% by the end of 2015 (from a 2007 future. However, we can, and do, work to gas and downstream installation and servicing baseline). In 2011, we achieved a 5% improve the efficiency of our power stations operations. We treat these two measurements reduction year-on-year (equating to a 19% and invest in more renewable sources separately because we can directly control reduction against the baseline). Total carbon (see Lower carbon power, page 25). our internal carbon footprint by changing emissions from our office, fleet and travel how we act within the company. Our absolute were 95,234* tonnes. Our 2011 internal Visit our data centre for more information emissions, however, are strongly driven carbon footprint figures have been assured on our carbon emissions. by customer demand for energy which by Deloitte, as have those for the 2007 we aim to influence but do not control. baseline year, providing a robust basis Managing our footprint on which progress can be measured. We are working hard to cut our internal Although the biggest contributions carbon footprint by raising awareness We set a carbon reduction target Property we can make to tackling climate change among employees, making our offices on our ‘core’ business so that we can 27.9% are in helping customers reduce their more energy efficient, investing in lower monitor the effectiveness of our carbon Fleet carbon emissions and decarbonising carbon vehicles, and providing alternatives reduction initiatives without the distorting electricity generation, we also aim to to business travel. effect of growth and mergers and 61.7% lead by example by cutting carbon acquisitions. See the Basis of Reporting Air and rail travel emissions from our own operations. Across the Group, behavioural change is for more information. 10.4% This also gives us an opportunity to a key factor in reducing our internal carbon engage our employees on sustainability footprint, as many of the reductions depend Managing emissions relating to our and showcase new technologies. on the activities of employees. We use a range own operations is part of our overall of programmes to promote behavioural change, environmental management, which covers In 2011, we developed a carbon map including training in 2011 for 758 drivers a range of other impacts including water, to show emissions across our business – in fuel efficient driving techniques, offering waste and biodiversity. More information and the level of influence we have over financial incentives to encourage employees on these issues is available on our website * Assured by Deloitte LLP for the each part. This is helping us understand to choose less polluting vehicles, and under Environmental practices. We report 2011 CR Performance Review. See www.centrica.com/CRassurance where our impacts are, and where we providing videoconferencing technology more than 60 environmental indicators to view the assurance statement are best placed to reduce them. to reduce the need for business travel. in our online data centre. and Basis of Reporting. Low carbon – Managing our footprint 29

Property management systems, and installing further our Canadian markets, which allows us to Globally, we have reduced carbon microgeneration and efficiency measures monitor mileage and better manage travel. emissions from the property portfolio along with our ongoing low carbon 10% of our core business by more than 35% behavioural campaigns. Although we have reduced the carbon since 2007. In 2011, we cut emissions emissions from our core commercial fleet We have set a target from our main offices by more than 10% Fleet year-on-year, organic growth and acquisition year-on-year. Initiatives that helped us In the UK, we continued to upgrade our have resulted in an overall increase in global to reduce UK office achieve this include installing our first fleet with more fuel efficient vans, achieving fleet emissions of 22% (since 2007). emissions by a further office biomass boiler in Manchester and a 1% reduction in emissions from our core We monitor and report these trends and 10% in 2012 by installing one of the largest solar arrays van fleet compared with 2010. In total, 2,279 apply the techniques used on our core fleet improving property in Scotland at our Edinburgh call centre. commercial vans were exchanged for more to systematically reduce the emissions We also employed our expertise in energy efficient ones in 2011. We also began our first from the incoming fleet where possible. management, making efficiency to make further improvements electric van trials in Leicestershire and intend better use of building in how we occupy and control to expand the trial further in 2012. Business travel energy management our buildings. We cut emissions from business systems, and installing In North America, emissions in our core company car travel in 2011 by more than We have set a target to reduce UK business fleet dropped by almost 8% during 16% globally through various initiatives. further microgeneration office emissions by a further 10% in 2012 2011, mainly due to a decline in operations However, air and rail travel increased and efficiency measures by improving property management, related to the economic downturn. We have by more than 16% due to a growth in along with our ongoing making better use of building energy begun a trial of GPS tracking in new vans in business activity. As a result, emissions low carbon behavioural from our core business travel remained unchanged compared to last year. campaigns

Progress on our Group internal carbon footprint† In 2011, we introduced two Nissan Leafs complete with solar power canopies Property, fleet and travel (TCO2e) 2011 2010 as pool cars at our Windsor and Staines † See Basis of Reporting for scope. Property 26,589 29,658 offices in the UK. Employees can now use the electric vehicles for local travel. ‡ This is an updated figure to that Van Fleet 51,710 53,623 reported previously, following We also introduced electric cars subsequent validation carried Car Fleet 7,032 8,425 as part of the company car scheme, out on data. Air 9,539 8,197 and continued to install video and web * Assured by Deloitte LLP for the conference equipment within our North 2011 CR Performance Review. Rail 364 290 See www.centrica.com/CRassurance America and UK operations to reduce the to view the assurance statement GLOBAL TOTAL 95,234* 100,193‡ need for business travel, particularly by air. and Basis of Reporting. Energy supply – Overview 30 300% Our aim is to increase our total offshore wind capacity by 300% to 560MW by 2016 



Energy supply  Building a diverse portfolio  of energy sources is critical

to ensuring that we do not rely too much on any single source Frontera Power Plant, Texas, USA Energy supply – Overview 31

Overview Our commitment to supporting the move UK Government enacted a new tax on to lower carbon forms of generation and oil and gas operations in the North Sea. Stable regulatory Sourcing, generating and the need to maintain affordable energy prices frameworks are essential storing energy for millions must be balanced with our fundamental Wherever we source energy, we must to attract the estimated responsibility to provide a secure and reliable make sure we minimise any environmental in long-term of homes and businesses energy supply. Building a diverse portfolio and social impacts that may arise. £200bn across the UK and North of energy sources is critical to ensuring We have strong systems in place to investment that is needed America is our core business. that we do not rely too much on any do this, with community consultation to meet future demand single source. playing a central role. Consumers expect us to provide energy as and To do this, we are expanding our oil and Energy security gas exploration and production capabilities when they need it, and as well as securing liquefied natural gas Energy needs are different across our to do so in a responsible (LNG) contracts from a number of countries. operating markets. In the US and Canada, and sustainable way. Similarly, we generate electricity from a range where security of supply is a less pressing of sources. In the UK, our investment in issue, the challenge is to capitalise on nuclear generation is complementing our domestic energy reserves and to reduce established network of gas-fired power reliance on foreign energy imports. In the stations. We are continuing to build offshore UK, which has become a net importer We acquired further assets in wind farms, and are exploring other renewable of energy as North Sea gas reserves Alberta, Canada which will provide options such as biomass power generation. decline, the issue of energy security is Direct Energy with an additional more marked. Centrica and others in 45bn cubic feet equivalent of proven Regulation can play a significant role in our the energy sector must strengthen the and probable gas reserves ability to maintain energy supplies. Frequently country’s energy infrastructure to ensure changing regulatory frameworks create sufficient quantities of gas and electricity We obtained our first full year uncertainty around investment in renewable are available to meet future consumer of nuclear power generation through electricity and nuclear power. It is important demand. Stable regulatory frameworks our 20% stake in EDF Energy’s that governments create clear regulatory are essential to attract the estimated UK nuclear power stations environments that allow us to make long-term £200bn of investment by 2020 that investments with certainty. We also seek is required to do this. Centrica is a leading player in offshore stable tax regimes, because unanticipated wind farm development in the UK, with changes reduce investor confidence and limit Gas interests in three operational farms our investment and production capabilities. As domestic UK gas supplies decline, and a fourth under construction This was seen in March 2011 when the we are exploring new overseas sources Energy supply – Energy security 32

allowing gas reserves to be stored during Centrica is investing significantly in the summer months when demand is lower, nuclear power (through our 20% stake and then to be drawn upon when demand in EDF Energy Nuclear Generation) and increases in the winter. Our gas storage renewable energy sources such as wind 30% facility at Rough, off the east coast of and biomass. Nuclear provides a stable England, provides more than 70% of UK baseload, but wind power is intermittent. Many of the UK’s storage capacity. Further storage capacity Our gas-fired power stations play an coal and nuclear power is needed as the UK continues to import important role in providing flexible back a greater proportion of its gas requirements. up for dips in wind power and surges in stations are approaching Our commitment to develop new storage demand. We do not own or operate coal the end of their operating facilities remains, despite our decision to power stations. This combination provides lives, with more than 30% terminate our Bains storage project following greater energy security for the future and of capacity due to come poor results from seismic studies. We continue helps to decarbonise our power generation and securing long-term deals to import to assess our Baird and Caythorpe projects (see Lower carbon power, page 25). offline by 2015 LNG. In 2011 we expanded our reserves subject to improvement in market conditions. in Trinidad and Tobago. We also continued Wind to develop long-term, stable trading In North America, further gas assets were Centrica is a leading player in offshore wind relationships with major gas exporters, acquired in Alberta, Canada in 2011. These will farm development in the UK, with interests reaching agreements with Qatargas in provide Direct Energy with an additional 45bn in three operational farms and a fourth Qatar and Statoil in Norway – the latter cubic feet equivalent of proven and probable under construction. We also have interests a 10 year deal that will begin in 2015 reserves – an increase of approximately 8%. in two onshore wind farms in Scotland. for 5bn cubic metres of gas a year. Electricity Offshore construction at our Lincs Our oil and gas production in the North Many of the UK’s coal and nuclear power wind farm, five miles off the Lincolnshire Sea progressed well in 2011. We extracted stations are approaching the end of their coastline, began in March 2011. More than gas from two new wells and brought operating lives, with more than 30% half of the foundations were in place by the another field into full operation. Production of capacity due to come offline by 2015. end of 2011. We expect it to deliver the outlook remains strong in 2012 and At a time when many UK companies are first power (135MW) in the second half beyond. For more information on our reluctant to invest because of economic of 2012 and to be fully operational in the production and exploration please see uncertainty, we are taking a lead by deploying first half of 2013, delivering 270MW, our 2011 Annual Report and Accounts. our capital – more than £300m in 2011 enough for 200,000 homes. alone – to generate growth, invest in energy Our investment in gas storage in the UK infrastructure, create jobs and provide We also have two proposed wind farms is an important element of energy security, a healthy return to our shareholders. awaiting planning consent off the coast Energy supply – Social and environmental impacts 33

of Norfolk, at Race Bank and Docking information on EDF Energy’s new nuclear Breakdown of Group Shoal. If approved, these would provide Courtesy of British Energy power stations, visit www.edfenergy.com/ power generation† enough power for 380,000 and 360,000 (part of EDF Energy) about-us/energy-generation/new-nuclear. homes respectively. Biomass Centrica was awarded the rights in 2010 As a renewable source of power, to develop offshore wind farms in the Irish biomass can play a useful role in diversifying Sea Zone, which offers potential capacity energy supply, although the associated of up to 4.2GW – enough to power around environmental impacts must be managed 3m homes. In 2012, we have been responsibly (see page 35). Centrica is seeking carrying out research and stakeholder consent to build and operate a power station consultations to identify areas within the fuelled by renewable biomass on the site zone that may be suitable for offshore of our existing gas-fired Roosecote power wind farm development. We will then draw The joint venture with EDF Energy also gives station at Barrow-in-Furness in Cumbria. up plans for wind farm projects which us the option to secure 20% of the electricity Subject to a successful application and will be subject to environmental impact from the next generation of new nuclear an investment decision, construction will assessments and planning consent. power stations. Together with EDF Energy, begin in 2013, with the plant expected we have the option, subject to the appropriate to be fully operational in 2016. It would Gas as % of total Group Our aim is to increase our total offshore permissions and economic case, to build up produce up to 80MW of electricity, providing generation wind capacity by 300% to 560MW by 2016. to four new reactors in the UK – two at Hinkley enough power for 125,000 households. 56.6% Point in Somerset and two at Sizewell in Suffolk. We held the first informal consultation Renewable as % of total Collectively, these will provide electricity for on this development in November 2011 Nuclear Group generation We see nuclear as an important part more than 10m homes, while helping to reduce and aim to submit a planning application of the energy mix, as it provides a stable, carbon emissions from power generation. for consent and begin more formal 14.6% low carbon source of baseload power consultations in 2012. For more information Nuclear as % of total Group to support the more intermittent power In July 2011, West Somerset District Council visit www.centrica.com/roosecotebiomass. generation generation from renewables. In 2011, approved preparatory works at Hinkley Point 28.8% we obtained our first full year of nuclear C subject to finalisation of the Section 106 Managing social and power generation through our 20% Agreement and conditions. In November, stake in EDF Energy’s UK nuclear the Infrastructure Planning Commission, the environmental impacts power stations. In 2011, we sourced independent body that examines applications 11,157GWh of nuclear power – 29% for nationally significant infrastructure projects, We need to manage the social and of our total Group generation based on accepted the Hinkley Point C main planning environmental impacts that can arise from † Based on our generation an offtake and power purchase basis. application for examination. For further supplying energy. New forms of energy, and site specific offtake Energy supply – Social and environmental impacts 34

Assessing the implications of the such as shale gas and biomass, present Fukushima disaster for nuclear power opportunities for improving energy security and moving towards a lower carbon future, but also raise significant concerns In March 2011 the Fukushima nuclear power station in Japan was hit The quest for improvements if operations are not planned or conducted by an earthquake and then a tsunami, which disabled emergency generators to the standards for the in a responsible and sustainable manner. required to cool its reactors and led to meltdowns of reactors. This raised design of nuclear facilities wide-ranging questions about the potential environmental and social and their operation must Managing these risks is critical to protecting impacts of the nuclear industry. never stop. Seeking to the environment, our reputation, retaining learn from events, and our licence to operate, developing new from new knowledge and business, and earning the trust of people in A report by HM Chief Inspector of which means that no matter how high experience, both nationally surrounding communities. We work hard to Nuclear Installations, Dr Mike Weightman, the standards of nuclear design and and internationally, ensure that our gas production and power was commissioned to assess potential subsequent operation are, the quest must continue to be a generation activities are carefully planned implications for nuclear power generation for improvement should never stop. fundamental feature of the and managed to avoid adverse impacts on in the UK. The report gave a clear Centrica agrees with that principle. culture of the UK nuclear the environment or human health, and to endorsement of the safety culture safety system, both for ensure they do not impinge on the human and current performance of the nuclear We are reassured by the report’s operators and regulators. rights of local communities connected industry in the UK, concluding that the conclusion that nuclear power stations to our operations and our supply chain. UK nuclear power industry had reacted in the UK are safe and well protected, Dr Mike Weightman, in a ‘responsibly and appropriately’ to the and that the need for new ones has not letter to Rt Hon Chris Huhne, We assess the social, ethical and events in Japan, ‘displaying a leadership changed. With our partner EDF Energy, Secretary of State for Energy environmental impacts of projects or for safety and a strong safety culture’. we have welcomed the report and and Climate Change acquisitions at their early stages, and have pledged to implement its 38 engage with stakeholders to understand The Weightman report underlines the recommendations as we have the option any potential impacts. Regular dialogue principle of ‘continuous improvement’, to build four new reactors in the UK. with local communities is essential to demonstrate that we are listening and responding to their concerns, particularly when we are constructing infrastructure such as power stations and wind farms, or exploring for gas. Through such engagement we seek to address any negative impacts our operations may have – and make the most of the benefits. Energy supply – Social and environmental impacts 35

Wind Nuclear about the smell. The incident was fully We are consulting with coastal communities Although we do not directly operate any investigated, and improvements have been The use of biomass as that might be affected by our work to nuclear facilities, we choose to report the implemented to prevent a reoccurrence a fuel at power stations develop offshore wind farms in the UK. Our waste and spent fuel which is produced as of this type of incident on site. offers real opportunity discussions with environmental organisations a result of our joint venture with EDF Energy. to the reliance on in 2011 led us to take steps to minimise The data is available in our online data centre. We continue to monitor developments in reduce potential damage to sensitive areas (see shale gas as its production expands in North fossil fuels in electricity feature on the following page). We engaged All of EDF Energy Nuclear Generation’s America. Some reports have highlighted generation further with stakeholders in 2011 regarding UK power stations are granted authorisations potential social and environmental risks our proposed wind farms at Race Bank and to dispose of radioactive waste by either associated with the process used to extract Docking Shoal to assess the potential impact the Environment Agency or the Scottish shale gas. Centrica is not currently involved on local and migratory bird populations. Environment Protection Agency. These in the extraction of shale gas. Should we authorisations require the recording of amounts decide to invest in extracting shale gas at For potential developments in the Irish of waste sent off-site each year. Nuclear waste a later stage, we will apply the same rigour Sea Zone, our consultation is focused on is treated in a number of ways to reduce to managing and minimising the adverse Anglesey, parts of the North Wales coast volumes before being disposed of, incinerated impacts as we do with all other areas and the Isle of Man – areas within a 35km or, in the case of some metals, sent for recycling of our operations. radius of the zone. We will also be carrying at specialist facilities in the UK. More information out some consultation outside these on the different types of nuclear waste and Biomass areas as appropriate. spent fuel is provided in the Environmental The use of biomass as a fuel at power practices section of our website. stations offers a real opportunity to reduce Part of the consultation has involved a series the reliance on fossil fuels in electricity of nine public information days to give local Gas generation. The large amount of biomass people an opportunity to meet Centrica Apart from greenhouse gas emissions needed to fuel power stations raises concerns representatives and for us to explain and associated with gas use, its extraction about potentially damaging social and discuss our strategy in more detail. We will and storage can have other, more local environmental impacts. However, it is possible consult on the first wind farm in the zone environmental impacts that we must manage. to source enough biomass in a sustainable to be taken through the consenting process In April 2011, a tank was over-filled at our manner using recognised, international throughout 2012 and 2013, before we North Morecambe Gas Terminal in the UK, forestry certifications and complying with submit any application to the National resulting in approximately two cubic metres the UK Government’s biomass sustainability Infrastructure Directorate, which replaces of liquid being discharged into the containment criteria. We are committed to only undertaking the Infrastructure Planning Commission bund. No liquid escaped onto the ground, but biomass projects that can be carried out in April 2012. We will also consult about as the liquid contained odorous condensate, sustainably, and are working with a range the associated onshore infrastructure. there were complaints from local residents of stakeholders to achieve this. Energy supply – Social and environmental impacts 36

Location Protecting salt marsh of Lincs through responsible wind farm Lincs cable laying Boston Laying cables to bring power from our offshore Lincs wind farm to land on the east coast of Hunstanton England posed a challenge after attempts to use a drilling technique under the sea defences were unsuccessful in 2010. King’s Lynn Walpole Much of the terrain the cables would tracks that exert low ground pressure. substation cross was made up of environmentally The first cable was buried several metres sensitive salt marsh as well as intertidal beneath the seabed to a point 8km from land. After consultation and discussion, the shore, where it can be connected to one we agreed with Natural England to use of two cables coming from the wind farm. specialised trenching equipment to install cables under the protected salt marsh Subject to final consents from the relevant and a sea defence. authorities, we plan to lay a second cable across the area in the early summer of During the summer of 2011, we 2012, applying what we have learned during commissioned a specially designed the first installation. A plan has also been trenching machine to minimise the impact agreed to monitor the immediate and longer of cable installation activities on the salt term impact, and to study the recovery of marsh. The trenching machine has large the salt marsh over the coming years. People and safety – Overview 37

0.25 In 2011, we improved our lost time injury rate (LTIR) per 100,000 hours worked to 0.25

People 

  and safety   We aim to build a culture where

our employees are empowered and able to flourish, and where safety and wellbeing are engrained  Centrica employee at Venture House, Staines, UK People and safety – Overview 38

Overview People their teams. Direct Energy introduced ‘Taking Charge of my Development’, a guidance Our Talent Boards are Our people, how we treat How our employees feel at work, and the programme that advises employees on how designed to help us them, how we help them trust they place in the company, is reflected to navigate their careers. British Gas’ senior identify high potential in their interactions with stakeholders. We aim managers were encouraged through our managers and, develop and their safety, to build a culture where our employees are Inspiring Leaders Programme to look at are essential to Centrica empowered and able to flourish, and where the cultural climate they set as leaders through our leadership being a successful and safety and wellbeing are engrained. and how this can support delivery of the development programmes business’ strategic objectives. and master classes, trusted company. Leadership development we provide opportunities We need strong leaders to drive our business Training and development success. Our Talent Boards are designed We operate in a rapidly changing for them to develop their to help us identify high potential managers market, which means we must help skills and capabilities and, through our leadership development our employees develop the skills to thrive programmes and master classes, we provide in new environments. We need to make opportunities for them to develop their skills sure that the people we recruit – as well and capabilities. In 2011, nearly 150 high as those who have been with us for much potential managers took advantage of these longer – are continually updating their opportunities. We also look to move our skills and knowledge. This not only allows highest potential managers around our us to deliver a high level of support for businesses and geographies to give them our customers, but also increases stretching experiences with a view to improving innovation within the business. the breadth of their leadership capabilities British Gas engineering academies and the organisation’s depth of talent. The services we provide, such as delivered 165,000 training days in 2011, installing or maintaining heating, electricity, of which the majority (71%) related To support our Group-wide emphasis plumbing or upgrading meters, requires to servicing and repairs on building trust, in 2011 our leadership specific technical knowledge. Across the development programmes focused on UK, British Gas’ network of engineering Our Employee Assistance equipping leaders with the skills they need academies provides opportunities to learn Programme’s life management service, to establish and embed the right culture across the technical skills necessary to become which includes access to finance, legal the business. Centrica Energy used a series one of a range of insulation technicians. and consumer advice, increased from of experience workshops, facilitated by experts We invested £21m in our six training 5% in 2010 to 22% in 2011 in neuroscience and motivation, to help their academies, which helped to deliver leaders deliver the required behaviours within 165,000 training days to our 1441 People and safety – People 39

apprentice and trainee engineers in 2011. the right working environment to encourage spirit and safety – and in 2012 will continue The majority (71%) of this training was high performance in their teams. this focus to drive performance within 22,700 related to servicing and repairs. their teams. These activities will help us In North America, Direct Energy delivered understand our employees’ concerns and In North America, Additionally, in 2011, 6,896 training days more than 22,700 hours of training, including experiences, enabling us to fine tune the were delivered to 1,929 people at our safety and technical courses, and leadership development and rollout of an engaging Direct Energy delivered Green Skills Centre in Tredegar, Wales. and development programmes. In 2011, Direct and productive culture. more than 22,700 hours The centre is designed to give people from Energy created a one-day training course for of training, including the local area, where there are high levels service technicians and residential call centre In 2011, we did not conduct a Group-wide safety and technical of unemployment, the skills required to teams to help them better understand the employee survey, opting to undertake local make Britain’s homes more energy efficient. company’s culture and how it relates to temperature check surveys by department courses, and leadership providing high quality services to customers. while we took the opportunity to take stock and development The technical capability of people in This new course will be offered to employees of how we measure engagement. The programmes Centrica Energy is increasingly important. in 2012. outputs of this exercise are being used Frameworks have been established to to inform how we measure engagement help them benchmark their performance Engagement in 2012 and beyond. From 2012 to 2014, against best practice and to identify We want our employees to be engaged employee engagement will be one of the areas for development. Centrica Energy and motivated at work. This helps make our non-financial key performance indicators in combines this with its focus on supporting business more efficient, improves productivity, our senior managers’ Long Term Incentive the development of managers to create keeps costs down through lower attrition Scheme. More information is available in rates, and helps to make Centrica an the Remuneration Report in our 2011 employer of choice for new talent. Annual Report and Accounts.

We engage with employees through Employee numbers a variety of channels to gauge how we are In 2011, we conducted a thorough doing and to ensure we address any concerns. review of our business to make sure Direct Energy carried out an engagement we are organised in the most effective survey in 2011, seeing an improvement in and efficient way. Primarily as a result engagement from 2010. In the UK, British Gas’ of this review, there were 768 redundancies Honest Conversation campaign encouraged across the business in 2011. employees and customers to provide feedback on services and operations, while Centrica However, Centrica continues to grow Energy has embedded the three values of and during 2011 we created new jobs The CE Way – high performance, pioneering and opportunities, adding about 3,500 People and safety – Safety 40

talented young people who are increasingly the risk of a major incident at our oil and gas Lost time injuries struggling to find employment. British Gas and power-generation facilities. We actively hired 244 apprentice engineers and 697 encourage a safety culture that goes beyond Total (per 100,000 hours worked)

trainee engineers across business areas putting robust processes and procedures 1.2 in 2011, a total of 941 new hires. We also in place: we want to empower everyone launched a new IT apprenticeship programme to take responsibility for their safety and for 30 people. We increased our recruitment the safety of those around them. 1.0 of graduates in the UK from 49 in 2009 to 72 in 2011, and were the highest climber in the Despite our best efforts in rolling out 0.8 2011 Times Top 100 Graduate Employers our safety management system including list. Direct Energy recruited an additional 12 audits, gap analyses and roadmaps, 0.6 graduates in North America. Working for two incidents do occur. to three years in a range of positions across 0.4 our business, this pool of graduate talent We expanded our reporting scope in will contribute to the continued success 2011, incorporating safety performance of our business in future. for our third-party managed activities that 0.2 are not directly controlled by Centrica. The employee retention rate across the Group This was part of our ongoing work to 0.0 ‡ † remained almost constant during 2011 at ensure a robust and best practice safety ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 89.5*%, compared with 89.9% in 2010. management system. Year new roles in the UK. In 2011, we had an average of 39,432 people working at For more information on employees, In 2011, we continued to improve our Centrica. This was up from 34,969 in 2010, including other aspects such as diversity, lost time injury rate (LTIR) per 100,000 primarily driven by new business growth visit our data centre and the People section hours worked to 0.25*†. The graph (right) in British Gas as it leads the provision of our website. shows our LTIR trend since 2005. Our total † 2011 figure includes third-party of residential and business energy and recordable injury rate was 1.66*† per managed contractors for the first time and is not directly comparable with services. Our employee numbers also Safety 100,000 hours worked in 2011, down 2010 data. grew in 2011 with the acquisitions of from 2.13 the previous year. The majority ‡ 2010 figure has been restated two energy retailers in the United States Our operations are inherently hazardous and of incidents involve engineers in our field- to include Clockwork Home Services – First Choice Power in Texas and we fully accept our responsibility to protect the based customer service operations as data on a proforma basis. Gateway based in New York. health and safety of employees, contractors, a result of driving or injuries while working * Assured by Deloitte LLP for the customers and the wider public. Safety risks at customers’ properties. There were 2011 CR Performance Review. See www.centrica.com/CRassurance We continued our graduate and range from slips, trips and falls and road safety no fatal incidents* involving Centrica to view the assurance statement apprenticeship programmes to reach incidents in our customer-facing businesses to employees in 2011. and Basis of Reporting. People and safety – Safety 41

Very regrettably, in the US a member Road accidents are a significant risk for in the East Irish Sea. No injuries resulted of the public was killed in a road incident British Gas and Direct Energy engineers from either incident. involving one of our employees. who regularly drive to support our customers. In 2011, we recorded an incident rate of 7.5* High-profile incidents such as the blowout 250 LTIR is a Board level key performance per one million kilometres driven for low severity on the Deepwater Horizon drilling rig in indicator and is reported in our Annual incidents. 10 high severity incidents* occurred. the Gulf of Mexico have put the spotlight In 2011, we delivered Report and Accounts. The metric forms We prioritise driver training for high mileage on process safety. Following the release of training courses to part of the business’ non-financial employees, new drivers, those changing the final investigation report into Deepwater more than 250 frontline performance measurement within vehicle type and other high-risk drivers. Horizon in September 2011, Centrica further operators, technicians, the Long Term Incentive Scheme reviewed and strengthened the improvements remuneration package. In 2011, we prohibited the use of hands-free made in 2010. This was backed up by engineers, managers mobile phones during business activities an independent audit of progress against and directors More safety data is available in our Group-wide. An e-learning programme called committed actions. Through the Oil Spill online data centre at www.centrica.com/ Safe Driving Plus was also introduced for Prevention and Response Advisory Group, datacentre. office-based employees to promote safer Centrica has been an active participant driving for commuting and personal purposes. in the UK oil and gas industry’s response Direct Energy also introduced a more stringent to Deepwater Horizon. At Direct Energy Road Risk Policy in 2011, along with a new we formed a Safety Risk Management training programme for those who drive Committee that reviews safety risk profiles on business. and significant learning events.

To view more safety metrics, visit our A key component of Centrica’s process data centre. safety strategy is to equip people working in our oil, gas and power businesses Managing major hazards with the knowledge and skills to manage The management of major hazards – major hazards. In 2011, we delivered process safety – remains at the core training courses to more than 250 of Centrica’s oil, gas and power operations. frontline operators, technicians, engineers, In 2011 we had two significant process safety managers and directors. This included incidents: a tank overflowed at the Barrow training at the specialist Spadeadam onshore gas processing terminal, resulting facility in Cumbria, UK, where participants * Assured by Deloitte LLP for the in odour complaints from members of the witnessed large scale demonstrations 2011 CR Performance Review. See www.centrica.com/CRassurance public; and a well servicing mast blew over of fires and explosions to reinforce how to view the assurance statement in high winds on the Millom West platform to prevent and mitigate such hazards. and Basis of Reporting. People and safety – Health and wellbeing 42

Health and wellbeing

Nuclear safety Plans for 2012 at each The tragedy of the tsunami in Japan We aim to promote the wellbeing of our employees and help to ensure their and the subsequent nuclear disaster long-term health. Creating and supporting a healthy, flourishing workforce business include: at Fukushima, in March 2011, was a increases productivity, reduces absenteeism and promotes Centrica as a significant test of the industry’s ability great place to work. This is an important factor in engaging and motivating  Centrica Energy: to deal with a crisis; a reminder that we employees so they can help us improve our relationship with customers. introducing an occupational can never be complacent about health, health management system, safety and the environment. health surveillance programme, full time equivalent employee in 2011 lifestyle screening and ‘fitness Centrica holds a 20% stake in EDF from 6.8 in 2010. to work’ assessments for Energy Nuclear Generation. While we do high-risk roles not operate any nuclear facilities, we have We created a Group standard for health a responsibility as a minority shareholder surveillance and monitoring in 2011. Our British Gas: and as a member of the board of EDF Employee Assistance Programme (EAP), implementing wellbeing Energy Nuclear Generation to monitor which offers employees help with personal programmes focusing on and oversee safety performance. problems that might adversely impact their areas such as nutrition and work performance, health and wellbeing, diet, money and debt support, Following the events at Fukushima, the was used by 9% of employees in 2011. smoking, men’s health, sleep, joint venture conducted detailed ‘stress A priority in 2011 was to encourage This was similar to 2010 utilisation of 8.35%. and reducing alcohol intake tests’ of the shared assets as required by employees to become more aware However, the EAP’s life management service the European regulator in order to ensure of the impact that health and wellbeing that includes access to finance, legal and the ongoing safety of their operation. can have on their performance, and to take consumer advice increased significantly from  Direct Energy: The UK Government also published the the initiative to manage this themselves. 5% in 2010 to 22% in 2011. This was due to focusing on increasing the Weightman report, endorsing the safety We continued to focus on three key areas: a strong communications programme following number of employees who culture and current performance of the UK helping employees manage their health the introduction of our new EAP supplier. see wellness as a priority in nuclear industry. We welcomed the report and wellbeing through health assessments, the business by improving and have pledged with our partner EDF workshops and practical advice (‘Be Well’); In 2012, management of the Group’s health the Tri Fit initiative, which to implement the 38 recommendations. managing the health risks that employees and wellbeing programme will be transferred encourages employees face, and preventing problems escalating to individual business units to enable to be more active For more detailed information, visit EDF into illness or absence (‘Stay well’); and, us to provide more tailored support for Energy’s website at www.edfenergy.com/ when employees do become unwell, employees’ different needs and priorities. * Assured by Deloitte LLP for the about-us/energy-generation/nuclear- helping them get back on their feet and 2011 CR Performance Review. See www.centrica.com/CRassurance generation. For nuclear energy metrics, back to work (‘Get well’). The Group-wide For more on health and wellbeing, visit the to view the assurance statement visit our data centre. absence rate decreased to 5.6* days per Health and wellbeing section of our website. and Basis of Reporting. Browse our corporate responsibility performance reporting at www.centrica.com/CRreportinghub

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