Imagine a world where Amazon and Google compete to sell you electricity and gas. A world where the vertically integrated giants have withered away, generators concentrate on generation, and the big six as we know them have dwindled, leaving just two companies – recognisable only in name – competing with the big names in retail.
If you can, then you have just peeked into the mind of Sacha Deshmukh, chief executive of the Central Delivery Body (CDB) and the man charged with getting into 30 million homes and businesses to roll out more than 53 million smart meters by 2020.
This revolution started small – with Deshmukh joining CDB chair Baroness Margaret McDonagh in the basement of Energy UK at the end of last summer. Today, the CDB ranks have swollen to nine full-time employees. But this team will change energy supply in the UK forever.
Deshmukh displays a contagious enthusiasm as he outlines his plans on how to get the public on board with smart meters, sort out the energy supply market and create a brave new world in people’s homes.
“The one thing that runs throughout the organisation like a stick of rock is that we are here to understand customers’ desire about how to live their lives, and how they want to be customers of gas and electricity in a way that normalises their customer relationship to that they would expect in other areas of their life,” Deshmukh tells Utility Week on a bright morning at the CDB’s current base in Farringdon, London.
This is easier than it sounds, apparently, because consumers already want what the scheme is attempting to deliver. “If you give them a blank piece of paper and ask them how they want the energy market to work, they pretty much come up with a data and communications company (DCC), and a SMETS 2 piece of technology which transforms the way they have their customer relationship with the suppliers.”
They seem to be remarkably informed consumers – but as ever, reality in the energy sector is complex. However willing the public is in theory, the CDB is up against the “toxic” reputation of the big energy companies.
“The level of trust in the whole area is so low, consumers are resigned to the fact that nothing can ever get better.
“They literally think somebody must be trying to trick them,” Deshmukh says, shaking his head in exasperation.
Part of the problem has been the companies’ history of over-promising and under-delivering, with so-called “miraculous” technologies that have actually been nothing more than just “adequate”.
The most visible strand of the CDB’s work will be the £100 million national advertising campaign – much like the oft-sung example of the digital TV switchover, and the Digit Al character.
The CDB is already on the hunt for a talented ad team, with “pretty much every big name” in the business keen to bid for the contract. Those on the initial 28-name shortlist included the big hitters in the marketing business such as Saatchi & Saatchi and JWT.
This long list has already been trimmed to seven, while the final shortlist will comprise four. The winner will be announced in May, with the national campaign starting “in good time” ahead of the mass rollout in autumn 2015.
Once the creative agency has been named and the five-year deal signed – the “most important appointment” the CDB will make – the message will be developed.
Deshmukh adds the CDB will “not be in any way precious” about how various organisations use the information and the brand, just that they use it to add authority to what is being said.
It’s a tall order. As well as building trust on behalf of a tainted industry, the CDB’s campaign has to correct a lot of misconceptions about what smart meters are and educate the public of their potential.
“I reckon what we’ll find when people understand what the real deal is, the level of enthusiasm is pretty high, tempered with thoughts of ‘is this really real?’”
The CDB will, however, be protective of its brand if it thinks it is being asked to cover up a technological shortfall. “We will never accept the brief of putting lipstick on a pig,” he says.
British Gas customers might be better informed than most, given the effort the supplier is putting into its smart meter rollout. What does Deshmukh make of that?
“I think only now we are starting to see what I would call the first generation of the same technology that’s part of the same family as the real deal.”
He says that these meters are not fully fledged smart meters because they do not, yet, interact with the DCC and are not compliant when the customer switches supplier, and consumers need to be fully aware of what they are getting – and not getting – when they get a British Gas smart meter installed.
“Are people being misled on what is happening? If they are, we will be amongst the first to tell consumers not to get misled.
“If British Gas are being clear that consumers are getting something good now, and later it is going to be further enhanced, then I’m all for it.”
A British Gas spokesperson told Utility Week: “We make it an absolute priority to be clear with customers about the smart meters that we’ll be installing and the benefits that they’ll see as a result.” The company is installing SMETS 1 meters, which can be upgraded without requiring a physical replacement.
Deshmukh says British Gas should be admired for its attitude towards consumer engagement and smart meters, because it is trying to change and adapt to the new, smart energy world, and that its shift in attitude comes from a “we’ve got our customer and they can’t do anything else” base.
He is more scathing about the rest of the big six, saying only two are likely to turn the buzz phrase “customer-centric” into anything more than management jargon.
“One or two of the big six will still be knocking around in the market but will be in perpetual decline, and a couple of them will have probably sold their customer book to Virgin, Amazon, or whoever else wants to enter the market but wants to start at scale.”
Deshmukh adds that the vertically integrated companies may decide that raising funds to invest in generation by selling their customer accounts is the best way forward. While some may try to move with the times, he says these “dinosaurs won’t manage to evolve”.
The Npower and Utility Warehouse deal – in which Npower sold 770,000 accounts in November – looks like a step towards this, he reckons.
The revolution will come from companies who have made their bones in customer service. He name-checks Bupa and Google as examples of companies that could come in and shake up the sector by offering “smart lifestyle” packages.
But the number one example Deshmukh gives of a disruptive entrant is Amazon, which could offer a smart lifestyle where energy is only one element.
“I predict Amazon will enter the energy market, not because they want to enter the energy market, but because they may want to offer me a complete smart living life. They will want to be selling you the appliances, selling you all the content and information you enjoy, selling you a smart car, and sell you all sorts of stuff for your home, and they will guarantee to be selling you the cheapest energy that powers all of that.”
And it will be not only the companies who sell us energy that will be different, but also the supply market itself.
Not only will there be those, alongside Amazon, offering the full “smart” package, but there will be those competing just on price.
While the latter sounds similar to today, Deshmukh predicts it will not be the same as today’s market where the big six “compete” on price.
He says those consumers who are solely concerned about price will buy their electricity and gas through comparison and switching sites. These will use the data – collected through the smart meter – to buy the cheapest energy for them. In this situation, switches will be done automatically without the consumer knowing, with switches done by the switching companies regularly – even multiple times a day – to ensure that the consumer is getting the best deal.
In conclusion, Deshmukh says: “That is what this world will create and in some ways it’s the most peculiar thing in the world to have a government national programme that delivers enormous disruptive technology that might actually explode the marketplace.”