Not many energy companies remember last autumn with fondness. As consumers roared in defiance of prices rises, companies were grilled by the energy and climate change select committee and flayed in the national press for profiteering at the expense of vulnerable individuals.
However, Iain McCaig, chief executive of First Utility – now the UK’s largest independent dual fuel provider – remembers the time in rather a different light. It was one of several pivotal moments in 2013, he says, which helped the company accelerate its growth.
“We committed early to freeze our prices throughout that winter. That meant we were mentioned a lot over almost two months when energy seemed to be the big topic every day in every paper and on every news channel,” he says.
Yet this intelligently timed promise to a pubic losing faith in incumbent suppliers is far from the only reason that First Utility was able to announce earlier this month that it had signed up its one millionth account, and achieved an enviable status as the only energy supplier to be listed in the Sunday Times Fast Track 100 every year since 2011.
“We also launched our Fix the Switch campaign, which aimed to reduce switching times – ultimately by half – and invested a lot in PR,” says McCaig as he strives to define what has made First Utility’s customer acquisition strategy successful.
“Our brand has also done well through a consistent profile on price comparison sites,” he continues. “We’ve been in a price leadership position for 23 out of 35 weeks this year. You don’t do that without being noticed.”
Most importantly, though, McCaig says that what makes First Utility’s appeal different from the big six is that it encourages activity where the big boys foster passivity. When it comes to other independents, he says First Utility stands out because its appeal is broader than many small suppliers, which pursue niche appeal for environmental or lifestyle demographics.
With 2 per cent of the UK’s residential market now in its arms, McCaig is understandably pleased with his firm’s erosion of the incumbents’ hold on the market and First Utility’s position ahead of other new entrants. But he’s also confident about the future and keen to see how the arrival of smart metering will further influence consumer switching.
First Utility is unusually well set up for this revolution in the UK energy market. A young company, its IT and billing infrastructure was built with smart metering in mind.
“The way that we have constructed our operating model is geared around things like cost of service, efficiency, automation and the ability – right from the get-go – to accommodate meter readings every 30 minutes,” explains McCaig. “That makes us fundamentally different from the incumbents, some of whom are set up to take a reading just once or twice a year.”
While McCaig knows change is afoot at rival suppliers as they prepare for the smart meter rollout next year, he is firmly of the belief that being built “from the ground up” for the age of smart technology puts First Utility in an unassailable position.
“The other thing to remember about smart metering – which will be very challenging for the incumbents, above and beyond getting the technology right – is that the more contact you have with a customer the more aware they are of what they are paying you,” he says.
“A large, passive majority of incumbents’ customers are on expensive variable rate tariffs,” he claims, suggesting that the arrival of smart metering may prove to be akin to “opening Pandora’s box” for some of them. “There are millions of ‘sleeping’ customers who may be woken up by smart interaction,” he predicts.
Perhaps such considerations lie behind recent murmurings from the Public Accounts Committee about the inability of competition to stop consumers shouldering a heavy cost burden for smart metering? Either way, McCaig complains that progress with the rollout is “painfully slow” and that it is delaying the sector’s ability to regain customer trust.
“Around one-half to two-thirds of customer complaints in the UK arise from meter misreads and inaccurate billing,” says McCaig. “Smart metering simply takes that away. All those things that cause so much grief for customers could be gone.
“But we are implementing the system in an unnecessarily complex way and without enough velocity. I think this is very short-sighted of the industry,” McCaig pointedly concludes.
With the Competition and Markets Authority’s inquiry into the energy market gathering steam, the problem of customer trust, and the integrity of industry action to regain it, is kept at the forefront of the news agenda – and people’s list of concerns.
Given this, it seems only right to ask if First Utility’s recent launch of The First Utility Foundation, a charity that will receive 1 per cent of company profits to help needy families and individuals, was designed to bolster the growing independent’s brand.
McCaig says not. “The First Utility Foundation is absolutely not about gaining trust or getting a good image with customers.
“This is a distinction that is very important to me. I wanted to launch the foundation because I believe strongly that businesses should do things beyond their fiscal, regulatory or policy obligations, to give something back to society.
It’s a noble philosophy – which, conveniently, doesn’t do the brand any damage either. And with trust in utilities overall slumping with disheartening momentum, some good press is sorely needed.