Sara Bell never intended to set up an energy supplier, freely admitting that she took the decision to create Tempus Energy reluctantly. Now she has 100 customers on the books and a business that’s established enough to be challenging the government in court, the feisty former financier reckons that rolling your sleeves up and getting stuck into the market is the only way to achieve radical change.
And that’s just what she has done, Bell tells Utility Week on a grey autumn day in her small, buzzing office in Camden. Just eight months after setting up the business, and two years since launching the groundbreaking technology that underpins it, Bell is confident in the business model and looking forward to further growth – though that may be on the other side of the Atlantic.
In fighting mood, she tells Utility Week why her business model is better than the those of the big six, where the Competition and Markets Authority (CMA) has gone wrong – and what she’s got in store for the government in her European Court challenge over the capacity market.
Tempus Energy launched into the energy retail market in March to provide demand side response (DSR) to domestic and business customers, offering cheaper bills for those that agree to having their power switched off in times of peak demand. Bell has, she says, made energy supply as cost-efficient as it can be with her innovative DSR technology. Plan A was to sell the technology into the big six, but they weren’t interested, leaving Bell little option but to strike out on her own and create independent supplier Tempus.
“We realised we wouldn’t have any customers for our technology if we didn’t,” Bell explains, perched on a fire engine red sofa at one end of Tempus’ open plan office. “Actually, by doing that, we have realised that’s exactly the right strategy.”
The technology, which was conceived from her days in financial risk management, allows Tempus to shift consumer consumption from periods of high demand to low, cutting wholesale and network costs in the process and giving customers cheaper bills. Tempus’ 100 customers are split 70:30 between the business and domestic markets.
While a good thing for customers, DSR is also beneficial to the energy system. It is set to become more commonplace after the smart meter rollout due to start next year, with National Grid already intending to use DSR to balance the grid over 50 per cent of the time by 2030.
Bell is happy with the company’s growth so far. The target market for its technology is properties with electric storage heating, making up 10 per cent of the overall heating market. Tempus is particularly focused on social landlords, local authorities and student accommodation on the domestic side and organisations with large cooling or heating loads on the business side. Global giant Hertz and a fish processing plant in Scotland are among its first customers.
Bell does not foresee difficulties in attracting further business. “Contrary to what you read a lot in the media that customers are not prepared to engage in these new services, that is complete utter nonsense,” she says.
While the rest of the market is struggling to come up with ways to engage customers sufficiently even to convince them to switch supplier, Bell has found simply turning up at the door to be quite effective: “We have had the most extraordinary customer conversations. ‘Wow, you are the first electricity supplier who has ever come to see us!’ they say.”
Why would companies not be interested in optimising their energy use to lower their energy bill, she asks.
While interest has been good, the company has yet to turn a profit. The supply business is covering its own costs and those of the technology company, with Bell not expecting to break even until next year.
Tempus sought initial funding largely from various grants, including the Smart grant from the Technology Strategy Board, now Innovate UK, and the energy catalyst grant. It also has a £250,000 loan from the GLA Growing Places Fund.
Tempus raised a further £1.3 million through a crowdfunding round and high net worth individuals in May, and are currently looking to raise a further £5 million by end of this year. In addition the company has a “very supportive” investor base, according to Bell.
While her company is setting itself apart through innovation, Bell is perhaps best known in the energy world for her bold move against the government. At the end of 2014, she launched a legal challenge against the capacity market, claiming it unfairly discriminates against DSR by awarding only a single year’s contract, compared with up to 15 years for other forms of generation. If the European Court rules in her favour, £1 billion-worth of capacity payments may have to be repaid.
It’s a brave move – but Bell insists it’s in customers’ interests. “Customers should not have to fund the unwillingness to innovate by incumbent companies,” she says.
She doesn’t doubt that the government set up the capacity market with the best intentions, but intense lobbying from generation companies “terrified about what their new business model is” and without solutions, have scared it into subsidising traditional forms of generation at the expense of innovation.
“I find it somewhat outrageous that customers are asked to stump up because these entities have not innovated to a lower cost base,” she says.
If Bell believes consumers are being asked to pay the price for energy companies’ unwillingness to adapt to the future, are energy secretary Amber Rudd’s pledges to drive down bills for customers hollow?
Rudd has a credibility issue, Bell says, adding that subsidising costly nuclear over renewables such as wind and solar that are nearing grid-parity, undermines her promises.
“Unless you actually take the time to understand what’s causing the cost for customers, simply saying the words doesn’t mean anything. I don’t doubt for a moment that she is genuine in wanting that; it’s a question of how you actually deliver it.”
With the written element of the challenge complete, Tempus is awaiting an oral hearing. Bell has faith her challenge will be successful – “it contravenes the law” she says simply. Whatever the result, Bell’s actions are unlikely to make her popular among the big six.
She is equally clear on her opinion of the ongoing Competition and Markets Authority investigation of the energy market. Tempus’ press officer shoots the outspoken chief executive a worried look as the subject comes up. The investigation’s initial finding that vertical integration is not harming competition means Bell has already given up.
“We had some high hopes for the investigation. We actually bothered to go and give evidence. Even someone with a pea-sized brain can look at this market and see there is a market failure. If you invest in generation assets, you take money from shareholders, you build the plant, you must focus on maximising revenue from that generation plant.”
While the CMA has extended the time it has to mull over possible remedies to increase customer engagement, the only options are already clear cut in Bell’s mind.
“Pretending this country is made up of customers who refuse to switch suppliers is an absurd notion. People have better things to do with their time than switching between apples and apples,” she says. “You either make the generation business sell its power on the open market, or you do not allow the same corporate group to own both entities. Those are your two options; I don’t believe there are many more.”
Bell’s condemnation is not restricted to incumbents. The notion that new market entrants are being innovative is swiftly swept aside. “We are the first innovative supplier,” she says. While she concedes there is innovation elsewhere, it is not “transformative change” of the kind Tempus hopes to achieve.
One area of the energy market for which Bell has nothing but praise is Ofgem. She believes the regulator is genuinely trying to open up the market to new players, with the recent consultation on non-traditional business models being one example of its good intent.
“When suppliers like us start challenging the existing practices, such as moving to half-hourly settlement, challenges come up. We have found that Ofgem has been very responsive to solving those problems,” Bell says, noting that staff go beyond the regulator’s obligation to protect customers by supporting innovation.
You get the impression Bell sleeps well at night – but if anything were to keep her awake, it would be the pressures of running a pre-revenue company for three years. “It requires a certain mindset,” she admits. Despite the various grants she has been able to secure, at one point she worked four jobs in addition to running Tempus to keep the business afloat.
But even if Tempus does turn a profit next year and its customer base continues to grow, the future for the supply company will always be limited, Bell reveals – at least as far as the UK is concerned: “Five per cent.” That’s all Tempus could ever hope to achieve in the UK market, and that is the true mark of the state of competition in the UK energy sector, she adds. For all her fighting talk and promise of disruption to the old guard, Bell is not planning to stick around to slug it out with the big six. The future for Tempus instead lies abroad in the US.
“We will be unlikely to push for five per cent, because there are markets that are genuinely transparent. Why would I wait in the UK? It’s not a sensible strategy.”
The US instead offers the promise of a liberalised wholesale market, unlike in the UK, where bilateral transactions with hidden prices are commonplace.
How soon Bell turns her focus on the US is yet to be seen, but with the legal challenge still to be concluded and Tempus Energy taking off, she has plenty more surprises in store for the UK market.