British Gas owner Centrica will attempt to win back the hundreds of thousands of customers it has lost over the last few years by setting up a new low-cost challenger energy brand.
Centrica has signed a deal with a low-cost software provider called Ensek to run the new digital-only supplier, which has not yet been named.
Read more: British Gas owner Centrica to cut 5,000 jobs
However the Times first reported that earlier this year the firm started running a trial of a company called “British Gas X”.
In recent years, the rise of challenger energy brands such as Octopus, Ovo and Bulb has fundamentally altered the shape of the UK domestic supply market.
Last year, British Gas lost 286,000 customers, many of which moved in the direction of the cheaper deals offered by such newcomers.
Owner Centrica has been battered in recent years, and fell out of London’s premier FTSE 100 index in this month’s reshuffle.
It has also announced plans to cut 5,000 jobs as well as a significant restructuring of its senior management.
New chief executive Chris O’Shea said that the restructuring was a response to the “harsh reality that the firm had lost over half its earnings in recent years”.
The new business will be run by Peter Simon, who has been managing Centrica’s smart home business since last year.
The core British Gas energy services and supply business will be run by Matthew Bateman, who had previously headed up its services business.
A source said that the two businesses would not fight for the same customers.
Peter Earl, head of energy at Compare the Market, told City A.M.: “We applaud British Gas for not resting on their laurels.
“Whilst new entrants to the market tend to be positive for energy customers, it will be interesting to see how Centrica materially differentiates their new business model from the existing British Gas brand.
“The success of British Gas’ decision to set up a wholly new body will be dependent on a range of factors, including the receptiveness from digitally-savvy customers to embrace the new brand, and attracting people from different age groups and geographical locations outside of British Gas’ existing customer base.”
However, fellow renewable supplier Pure Planet hit out at the decision, with co-founder Steven Day saying: “Centrica is effectively saying the British Gas business model is broken, and certainly not for the future.
“It looks like it is realising that consumers no longer want big, bloated, expensive and polluting companies supplying their energy.
“If I was a British Gas customer, I would be wanting to ask why it feels it needs to launch another brand to give me a better, cheaper choice”.