Lack of trust in energy companies and lack of engagement from energy consumers is a keenly felt thorn in the industry’s side.
But a new energy supply start-up believes it has found the answer to both challenges in one fell swoop.
Our Energy plans to launch in 2017 using capital gathered through a crowdfunding initiative. Once up and running, investors will become shareholders and, ideally, energy customers. Customers who join later will also become shareholders after three years with the firm and all customers will benefit from redistribution of 75 per cent of the company’s profits.
Our Energy director David Pike tell Utility Week why his crowdfunded enterprise will mean energy consumers “never need to switch again”.
Q: You’ve said that customers will “never need to switch again” after joining Our Energy. Doesn’t that go against the grain of what Ofgem and government are trying to achieve in the market?
A: Not really. If you imagine the situation where you’ve chosen to go with Our Energy and a day later E.ON bring out a lower rate, you don’t need to chase that rate because, if we are slightly higher on those few days, you will be getting the difference returned to you in profit anyway so there’s no need to switch. You can switch anyway if you want to but there is not much point because if you are getting the lowest tariff and a rebate.
Q: So, do you think it is wrong that there has been such a focus on encouraging regular switching in the market?
A: What we will never do is offer a low rate as an enticer to get people on board with the hope that they will fall onto the standard tariff – which is generally the most expensive for all energy companies – and then make money because they are on the higher standard tariff.
That’s why I completely understand why Ofgem want to encourage switching. I think the energy companies aren’t honest when they don’t tell you that you’ve gone onto the standard tariff and are paying an extra £30-40 a month and they just ‘forgot to mention it’. I don’t think that is a particularly fair or ethical way of doing business so we aren’t going to be doing that.
Q: You’ve promised to return 75 per cent of profits to customers. How are you going to make that sustainable?
A: One of the reasons for retaining the 25 per cent is so we can use that to create resilience and robustness within the business. So we’ll try to use that to create war chest of cash to be able to see out any peaks in the energy price, which inevitably will happen in the future.
Q: You want to launch Our Energy later this year. What will be your biggest challenges once you are live in the marketplace?
A: I think some of the biggest challenges will be managing the peaks in the energy price, especially in the winter months.
We are developing some strategies including hedging to help with this. I think we can do it but it will be a challenge. I’m under no illusion that it won’t be an uphill battle. However, the public seem to be behind what we are trying to do.
We’ve got nearly 500 people that have showed an interest, that’s quite a lot of people voting in. We have also been collecting people who, whilst they haven’t pledged, have registered an interest in the company.
We have over a thousand people who want to be customers. That’s unusual for a business start-up in the energy sector – to have that many customers already in the pocket as it were.
By the end of the campaign we hope to have 4-5000 customers already lined up. This is a pretty unique position that I don’t think has been replicated.
Q: What’s the crowdfunding experience been like? Is it a viable method for new energy suppliers to get the ball rolling?
A: I think it is a potential for other energy suppliers however only if they were giving the profit and shares to the customers otherwise why would the crowd fund you?
Backers of the crowdfunding are extremely likely to become customers because the pledges are designed in such a way that they will get free energy back for the amount they have pledged plus some extra interest so there is a lot in it for them.
We will have our first few thousand customers as a result of the crowdfund whilst having not spent anything significant on marketing the campaign
Q: Are you confident you will reach you crowdfunding goal?
A: I’m very confident. I believe it will. We are up to £64,450 now which is 14 per cent of the total. We will reach our funding goal and I’m very excited as you might imagine.
Q: Will Our Energy be focussed just on low cost energy? Or will you offer options for customers who value, for instance, green energy over cheap energy?
A: We will offer two tariffs, lean and green. We will have two tariffs to start and later down the road we will hopefully be generating, or hopefully buying renewable sources ourselves so we can transfer that electricity directly.
In addition, we are committed to broader ethical actions. For instance, we have an option on our crowdfund for the lower pledges to give 10 per cent of that pledge to homelessness. It’s our intention that, when people are receiving their rebate, they would have the option to negate it and send it instead to a homeless charity instead.
We do have a compassion for those who are homeless. I myself slept out on Edenborough’s streets in a CEO sleep out a couple of weeks ago to actually experience what it is like to be homeless. It is something I am quite passionate about.
Q: What do you think of the proposals put forward by the Competition and Market Authority to make the energy market fairer and more transparent?
A: Maybe some of the recommendations are good but, for example, I wouldn’t want my address given to every energy company so that they can then bombarded me with mail. I don’t think that is a particularly good move, I think that is unwise, unhelpful and people won’t like it – that is one of the recommendations. It’s a mixed bag.