Last October, David Cameron made an impromptu pledge to force energy suppliers to put consumers onto the lowest tariffs. The prime minister had an eye to help both the masses struggling with energy bills in general, and the fuel poor in particular. The Department of Energy and Climate Change and Ofgem picked up the pledge and developed it: a four-tariff cap is now set to be introduced later this year.
The prime minister could have looked a lot closer to home for inspiration. In his constituency of Witney, tucked away in an industrial estate a stone’s throw away from the town centre, supplier Ebico has been working for the past 15 years with the sole aim of helping fuel-poor energy customers.
Phil Levermore, managing director and founder of the not-for-profit company, came up with the idea to target poorer customers shortly after privatisation – when energy companies were competing hard to supply low-cost-to-serve customers to make a quick and easy profit. “The flip side is that competition wouldn’t get anywhere near the poorer customers,” he explains.
“I saw that as very unfair and thought something had to be done about that, so I got together with some like-minded professionals not from the electricity and gas supply sector and we decided rather than set up a lobby organisation – there are already good lobby organisations in existence – we should do something different.”
That something different was Ebico. Set up in 1998, it launched a gas tariff the following year and an electricity tariff in 2002 (see box).
Getting its first tariff up and running was not a simple task – partly due to Levermore taking Ebico down the not-for-profit route. “We wanted to be not-for-profit, which meant taking relatively few risks, so we decided to take the white label approach. We cast around in the late 1990s for a partner and the only one interested really was Southern Electric – now SSE. So we did a white label agreement with them and that has been operating very successfully for the last 15 years.”
Despite the challenges, Levermore is convinced the not-for-profit route is right – not only for Ebico and its 50,000 customers, but also for the wider market. He explains: “The advantage of it is that we can take decisions that are not necessarily commercially optimum profit-making decisions. If you had shareholders, you would have a duty to make them as much money as possible to return to them. But we have the freedom not to do that and to choose to do other than that – i.e. put our social objective before our profit motive.”
That social objective: to give people in fuel poverty the best deal possible. “Always has been and always will be,” Levermore affirms. “This means inevitably you deal with a sector of customers that isn’t necessarily going to give you the best return on your investment and if we were under pressure to maximise profit I’m sure in the last 15 years we would have strayed into other areas which are more profitable – more lucrative shall we say – and that would have meant us going away from our core principles. But we haven’t because we haven’t had to.”
As for benefiting the wider spectrum of energy customers, Levermore says Ebico has made the big boys sit up and take notice. “Our very existence, the existence of the tariff, has itself prompted change across the industry. We were there, it existed and no doubt people were saying, ‘Hang on, if they can do it, why can’t you?’.”
Ironically, however, the four-tariff cap now emerging from Cameron’s pledge and Ofgem’s Retail Market Review (RMR) could put white label energy suppliers – including Ebico – out of business. As RMR currently stands, a white labeller will either have to offer the same tariff as its partner or obtain its own supply licence from the energy regulator – something Levermore recognises as “a real threat to us”.
Not only that, Levermore thinks RMR will turn people off energy even more. “The thing is, if you only have four , all the suppliers will go for really safe offerings that don’t really challenge people. I think that is a real shame and what I think will happen is consumers, who are already fairly bored with energy, will get even more so. The reaction will be a massive yawn.”
Instead, Levermore is keen to explore how collective purchasing schemes and community engagement could help make energy “sexy”. “I think the real advantage of getting people together comes in terms of cost and price,” he says. “If a collective organisation could take responsibility for billing and collection on behalf of the collective, those cost savings could be passed on to its members.
“If you combine it with maybe some local generation project, then it gets really interesting. What happens then is you get a behavioural change, an attitude change, because energy starts to become something that’s local. Once energy becomes sexy and interesting then I think it’s a lot easier for people to begin to engage with it as an issue.”
Back to the here and now, in the world where energy is far from sexy, Ebico is also helping communities in fuel poverty via the Ebico Trust. This was set up to collect the surplus the supplier makes from its energy sales and to redistribute it to fund initiatives to improve the energy efficiency of low-income householders’ homes and offer support and advice on saving energy. It has paid out more than £600,000 in the past two or three years.
According to Levermore, whatever the outcome with RMR, Ebico’s philosophy and framework will go on. “Our motto is ‘Use the market to make a difference’,” he says. “We’ll use whatever the politicians end up with and decide is the best instrument for them to implement and use that as best we can to make a difference, particularly to low-income customers.”
Tariff equity
Ebico offers a gas tariff – EquiGas – and an electricity tariff – EquiPower. In each case, all customers pay the same rate regardless of how they pay or how much they consume. EquiGas costs a flat rate across the UK of 5.06p per kWh including VAT (4.81p per kWh excluding VAT). The EquiPower tariff varies by region, reflecting local costs and conditions.
Other suppliers penalise those who pay by expensive-to-manage methods such as prepay (typically those at the poorer end of the scale) by charging them higher rates. Ebico says prepayment meter users can pay up to a third more than online customers in some instances. Many suppliers also offer deals to bigger consumers.
According to Ebico, under its system: “Nobody is penalised because of his or her budget or circumstances, or by how much gas they choose to buy. Everybody pays at the same fair rate and there are no standing charges.”
This article first appeared in Utility Week’s print edition of 15th March 2013.
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