Last year was a challenging year for the energy sector. The price cap announcement dominated the headlines for energy retail companies, while the energy networks found themselves under scrutiny over supposed “excessive profits”. And 2018 doesn’t look set to be any easier. Questions continue to circle the legitimacy of the sector, market conditions are making life difficult for smaller suppliers, and Brexit is only going to have a greater effect.
It was with these challenges in mind that industry experts gathered at Utility Week’s Energy Customer Conference in Birmingham, sponsored by Oracle and BMG Research on 18 January.
To adapt to the changes going on in the sector, Ofgem has warned that the way it regulates companies needs to transform. Ofgem partner for consumers Anthony Pygram told delegates that the regulator needs a “more agile framework” for regulation, one that is flexible to market conditions.
Growing concerns around vulnerable customers are beginning to instigate major shifts in the sector
“Vulnerability” was the word of the day. Much debate has surrounded the definition of vulnerability, with Ofgem defining it as when a consumer’s personal circumstances and characteristics, along with the market, make them less likely to protect or represent their interests in the energy space. These growing concerns around vulnerable customers are beginning to instigate major shifts in the sector.
A price cap for the entire market is on the way, but Ofgem has already introduced an enforceable vulnerability principle, under which suppliers are expected to ensure the fair treatment of vulnerable customers, as well as provide a safeguard tariff to protect prepayment customers receiving the Warm Home Discount.
However, Pygram warned that the regulator does not currently have appropriate regulatory structures to cover the increasing influence price comparison websites, aggregators, energy management advisers and new strains of suppliers have in the market.
Smart meters will have an enormous impact on the energy market
Technological advancements and the increased use of data were also key discussion points at the conference. This includes the rollout of smart meters. Many in the industry believe mounting technical and procedural problems with this programme will come to a head this year. The government has already pushed back the concrete deadline for the transition to SMETS2 metering, while continuing to insist that a series of delays to different parts of the programme will not affect the overall deadline of offering meters to 26 million households by 2020.
Speakers agreed smart meters will be a “key enabler” to customers gaining ultimate control of their energy use. Energy UK director of retail supply Audrey Gallacher argued that they will have an “enormous impact” on the market.
If the rollout of SMETS2 meters is achieved, one thing they will bring is more customer and consumption data. This is a good thing, as long as the data is properly analysed, and the information extracted is fit for purpose.
The digital customer wants more from a utility
Energy companies, regulators and government alike must “raise their game in two important respects regarding data”, according to Chris Harris, head of regulation at Npower. Namely, taking a “joined-up approach across the utility and policy landscape”; and “making a commitment to improve data”, especially where it is shared or transferred between users.
The digital customer landscape is driving change in the energy sector. The “digital customer” wants more from a utility, and the rise of social media has created a culture of “instant gratification”.
Octopus Energy chief executive Greg Jackson explored how to make energy work in a world of instant gratification, arguing that the speed versus certainty trade-off was “meaningless to consumers”. “You can’t have certainty without speed, you can only have as much certainty as you’ve got speed, you can’t be certain until it’s done,” he said.
The industry can be in no doubt that the year will bring with it many challenges as the sector continues to transform. It will be up to energy companies to meet those challenges head on, or risk being outrun by their competitors.
Key takeaways
- Data – the mass of data needs to be used effectively and shared accordingly.
- Vulnerability – customers with specific needs should be the focus, as some may be at risk of forfeiting critical medical care.
- Digital customer – the digital customer landscape is driving change in the energy sector; energy suppliers need to embrace this or risk losing out in the long run.
- Prosumers – customers who consume and produce energy are on the rise and energy suppliers need to take notice.
- Renewables – business customers have an opportunity to take back control by deploying on-site generation.
Views from the speakers
Andy Eadle, director of customer service, First Utility
“For us it’s all about engagement and reducing effort. That means creating a relationship with the customer throughout their time with us, so they feel informed and in control through monthly billing and giving them great insights into usage through their app.”
Anthony Pygram, partner consumers and competition, Ofgem
“How companies are regulated may need to change significantly.”
Audrey Gallacher, director of retail supply, Energy UK
“As we move into a smart energy world we need to ensure we are not leaving anyone behind. Traditional energy models that we have known for the past few decades are going to change quite radically; it will probably be unrecognisable in about ten years’ time.”
Jonathan Kini, chief executive, Drax Retail
“The most sustainable thing you can do is not use energy.”
Greg Jackson, founder and chief executive, Octopus Energy
“The days of the term ‘small supplier’ are numbered. Small suppliers now are intent on changing the industry to bring better value to customers, more transparency and more efficiency.”
Martin Dunlea, senior director of utility industry strategy EMEA, Oracle
“The digital customer needs more from utilities.”