We need to be constantly on our toes,” Guus Weiss explains. The new head of GDF Suez Energy UK’s retail business is discussing the demands of the business energy market. But he could just as easily be describing the past six months he has spent at the helm. Weiss left the Dutch arm of GDF Suez earlier this year to take up the challenge of growing the 5-7 per cent share of the UK business in an increasingly competitive market, just a few months before the sector-wide referral to the Competition and Markets Authority (CMA). But this is no bad thing – now, more than ever, the UK may be in need of a fresh perspective, he suggests.
The perspective from Weiss is clear: the market should be driven by customer-led innovation and guided by regulation that is streamlined and efficient, he tells Utility Week. Although not unduly critical of the UK, he outlines how his experience in mainland Europe and in the business-supply market has shaped his view of the UK’s shifting energy landscape, and the work that still needs to be done.
“I’m actually really happy to be here,” he chuckles, “because this is the first country in the world that opened the market for energy. It’s very mature and everything is externalised – even the national grid is in private hands – and this gives a lot of dimension.”
The business supply market perhaps shows the UK energy sector at its liberalised best.
While the domestic market is seen to be dominated by a handful of the “same old suppliers” – all of whom are dogged by accusations of poor customer service – B2B market players need to work hard to offer bespoke supply solutions at a competitive price in order to survive. There is fierce competition. There is a drive for innovation. There is real choice. In many ways it’s a regulator’s wishlist for everything the domestic market should be – but isn’t.
“A B2B market lends itself to being competitive,” Weiss agrees. “It is very competitive and you see a lot of new entrants, with different business models, which is good because different customers have different needs.”
So how does GDF Suez compete?
“The challenge is to listen very well to what your customer wants… if you do that you can get your quality up but you can also get your costs down,” he says. So far, the Leeds-based team has proved nimble enough to “make decisions quickly”, and although it is small it benefits from the backing of a European energy giant, Weiss adds.
The business focuses on three core offerings that are increasingly interconnected: the traditional sale of gas and electricity; the purchase of renewable energy through power purchase agreements (PPAs); and other “energy services” relating to demand management and sustainability, which Weiss says are becoming “more and more important”.
An example of just this emerged last month when, in response to demand, the company launched a service enabling customers to track their energy use ahead of tight supply periods expected this winter, Weiss says.
The data could help customers minimise transmission network use of system (TNUoS) charges. These charges appear on the electricity bills of business customers each year and are based on average electricity consumption during “triad” periods – the highest three half-hourly periods of peak demand per winter (see box on triad charges, p8).
Ultimately, though, businesses make decisions based on the bottom line. And GDF Suez is working just as hard to provide flexible, transparent pricing.
“We were the first ones to introduce flexible products,” Weiss says matter-of-factly.
Business suppliers typically offer fixed-price or rolling contracts based on the prevailing market rate, but GDF Suez also allows its customers to fix the price they want at a later time, based on the market.
“We actually do the same when we buy the PPAs. The sellers want to be secure that they have a good offtake for their product but they want to manage their price,” Weiss says.
Customers also want their prices to be transparent, Weiss adds, so in the past two to three months GDF Suez has started allowing customers to choose their contract rate based on the price shown by any of the main four electronic trading platforms used by the market.
The level of flexibility and transparency stands in stark contrast to the UK’s domestic retail market, which has remained on the same tariff levels over the past year despite heavy falls on the wholesale power market. The bearish sentiment resulted in multi-year lows and calls for price cuts from consumer groups.
“Do we pass on lower wholesale costs? Well, we’d be out of business if we didn’t pass that on. If the customer buys their energy in the summer then they have the summer prices – if they do it later then they have different prices – so on the B2B markets that’s really not an issue,” Weiss says.
Although domestic customers are also free to opt for fixed-price or rolling contracts, Weiss says the rates are not as market-reflective as B2B contracts. But perhaps they should be.
“If buys a fixed-price contract in January or July you should see a difference in price because the underlying trading market is different,” he argues.
But the dissatisfaction surrounding domestic retail supply extends beyond price, into customer service, Weiss adds.
“If, as a business, you pick up the phone to four or five different suppliers, by the next day you’ll have four or five different offers,” he says. It’s hard to imagine a household having this much buying power. Or, in many cases, a satisfactory response from an energy supplier. And Weiss agrees.
“From my personal experience, coming here, it seems really hard for big companies to be personable. I think there is a niche in the market for suppliers who want to treat customers like human beings,” he laughs.
As a supply company with ambitions for growth and a commitment to customer service, GDF Suez seems well placed to fill exactly such a niche. But Weiss is not easily drawn on the prospect of entering the domestic market.
“We have no immediate plans, but of course we watch the market carefully. We would like to be in any chain of the energy business where it is possible and when it is profitable,” Weiss says.
The issue of profit is not a hindrance, he says.
“From what we see in mainland Europe, if you do a proper job, household supply can be more profitable than the business supply side. And that is something that is the next step for us. You see us doing that in mainland Europe so I don’t see a reason why we shouldn’t – sooner or later, at some time – be here. But again we don’t have concrete plans for that,” he adds quickly.
With the harsh regulatory glare of the CMA focused on the generation and supply market, now might not be the best time to enter a market as politicised as the domestic sector. But even though the B2B market is not as firmly in the spotlight, Weiss says the UK’s regulatory tangle has very real implications for the market GDF is in.
“The rules and regulations are layered on top of each other and when there is a new rule or regulation we see immediately that it impacts the customer. I don’t have an opinion about whether this is a good or bad thing, but from a practical point of view I think the industry spends more money on being compliant than we do on innovating our products, and I think that’s a pity.”
The CMA probe could be a good time for the industry to rethink the way that regulation is put in place. It’s not all about the rules, but how they are implemented, Weiss argues. And efficiency is key.
“Ofgem consults and then comes back with a decision. But what I’m used to in the Netherlands is that representatives from the whole industry make a decision together and they also manage the process together. For example, the national electricity grid, the national gas grid: they have a company together that handles all the energy data, so all the data for the grid and for the customers is all together. It is quite efficient.”
But for now, Weiss’s focus falls on the year-end period when many companies will be looking to agree new contracts for the next calendar year. The goal, he says, is that GDF Suez is always “at least considered” as the supplier of choice.
In a sector as competitive as B2B energy, Weiss has his work cut out for him. And he seems rather pleased to be tackling it.
He smiles, shrugs. “In a way, it’s a nice game to play.”