With the rollout of smart meters in its early stages and scheduled, according to the government, to be “in full swing” by 2016, domestic energy customers might be expected to be anticipating improved services, tariffs tailored to their needs and other benefits that smart metering has the potential to bring.
However, evidence from a recent survey suggests that householders have little expectation that they will be the winners once smart metering is rolled out across the country. Interestingly, where customers do anticipate better service they expect it to come not from the major players but from new entrants, primarily due to their lack of legacy IT systems and their relative agility.
Breaking down the results of the YouGov poll, conducted for IT testing group SQS, of the 2,058 people surveyed 37 per cent predicted that their energy supplier would be the single greatest beneficiary of the smart metering rollout. Furthermore, 56 per cent agreed that smart metering is “about more power for energy firms as they get lots of data about customers”. Eighteen per cent agreed strongly with that view.
Seeking out positives for suppliers, it is notable that the big areas where customers claim they want their energy suppliers to improve are also the easy wins for smart meters. Fifty-two per cent of respondents wanted services, tariffs and offers that reflect how they actually use energy, while 48 per cent wanted transparently accurate billing.
In addition, there is a notable opportunity for energy suppliers to make a good impression by simply keeping customers informed. Nearly half of the respondents did not know smart meters were to be installed in all British homes by 2020, and 44 per cent were eager to know which were the energy-intensive devices in their homes.
There is a broad challenge for suppliers to significantly raise their game on service as smart metering becomes the norm. Forty-six percent of respondents said the rollout of smart metering will provide “the perfect opportunity” to improve customer service and, delving further into this expectation, there is a strong belief that new players in energy supply will deliver better services in association with smart metering.
While edifying for independent suppliers, this enthusiasm could carry a practical threat of which they should be wary. A stampede of new customers could place a new entrant’s systems under pressure they are not equipped to deal with. Furthermore, with expectations high, the risk of disappointing customers on service is amplified for new entrants.
Incumbent suppliers considering the results of this survey should assess carefully the flexibility and efficiency of their legacy IT systems and their ability to respond to smart meter-related market trends and customer expectations.
Once universal smart metering is in place, the pace and direction of change could be unprecedented and driven by new entrants, free from legacy systems and tarnished reputations. As such, today’s major players are under pressure to upgrade their systems in order to hold off the opposition. At the same time they should take note that any errors arising from these upgrades could have resoundingly negative effects on trust, reputation, and marketing opportunities.
Overall, there is little confidence that smart metering will deliver. One half of respondents believed that smart metering costs would outstrip gains for householders, and 63 per cent, the biggest single percentage group in the survey, were convinced the rollout would not proceed to schedule.
A little relief was offered to suppliers in the ambivalent response of those surveyed to the suggestion “customer-focused firms such as retail brands would make better energy suppliers”. This comes amid regulatory concern about complexity in the market and threats to consumer protection arising from supermarket white label energy offerings. Only 26 per cent of respondents agreed that retail brand companies could be better energy suppliers, with 23 per cent disagreeing and 63 per cent in the “don’t know” camp.
The flip-side to this is whether energy retailers can successfully venture into new, non-energy areas. According to market analyst Quindi Research: “The permutations are diverse, but many embrace the idea of using non-commodity and value-added services to create highly differentiated propositions.”
Wherever they take their businesses, energy retailers will require competencies in billing and customer information that are orders of magnitude greater than currently required or supported. That implies an imminent disruptive change to the very systems that form the energy retailers’ competitive firepower.
SQS’s Chris Abbott warns: “With so much coming on – new markets, smart technology and so on – you’ve got to be slicker and faster at dealing with all the things you have to do and that you’re finding moderately difficult – such as regulatory compliance. Meanwhile you have to deliver on other changes to keep ahead of the competition. If you just deliver business as usual and neglect those changes, it’ll damage your business.”
Certainly, suppliers cannot afford to mess up the rollout. Thirty-seven per cent of respondents in the SQS survey felt that “energy suppliers have too much to lose to get the rollout of smart energy meters wrong”. The question for all sides, then, must be: are they, and their systems, up to the size and nature of the challenge?
Angus Panton, director of utilities, SQS Group