How switched on energy suppliers will react to big changes in utilities legislation

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With new technology going mainstream, and big changes in regulation transforming the way utilities contracts are managed, companies have got more than just prices to think about.

There’s more opportunity than ever before to shop around for the best deal, with absolute freedom to leave a current contract when it’s up and switch supplier in less than 10 minutes.

Customers expect more from their suppliers, and if they don’t deliver, the path to the exit door is lined by bright lights and the promise of a better deal. Companies such as E.ON, Green Star and British Gas are going to have to step up or step aside.  

And what about Smart Meters? Set to become a domestic norm by the end of the decade, how can suppliers encourage installation and work to promote smooth transition and adoption?

THE CONTEXT OF SMART METERS

Smart meters are the next step in energy usage measurement. They send readings digitally to the supplier — cutting out awkward and sporadic home visits — and allow bill payers to track their output accurately with ease.

These bits of kit may seem like just another modcon to some, but they come with very real benefits; more accurate bills, a better understanding of energy usage (with the help of the monitors that are supplied upon installation), seamless switching, cheaper prices and lower carbon emissions throughout the UK.

Recent legislation will ensure that every UK household will be fitted with a smart meter by the end of 2020. The so-called smart rollout will rely on suppliers arranging installations and consumers making themselves available and ensuring their existing meters are accessible.

ROADBLOCKS IN SMART METER ADOPTION

Awareness seems to be the main roadblock and/or a reluctance to adopt new technology.

However we’re also seeing early adopters having genuine problems when it comes to switching suppliers, as first generation meters are not compatible with all companies — and it is pitfalls like this that deter consumers and the energy companies from getting fully onboard.

When it comes to the UK business environment there’s definitely room for improvement — with only 33% reporting they had a smart meter by the start of 2016 (a meagre 3% increase on the year before). Unlike domestic users, businesses can actively upgrade their meter should they so wish. And yet, numbers still continue to climb slowly.

While smart meter penetration has increased in England and Wales, there has been no change in Scotland. It seems that if suppliers want to accelerate the move over to smart technology, they’re going to have to do something about it themselves. (Ofgem)

And the same rings true in the consumer space.

While installations themselves aren’t voluntary, and domestic users will have to wait until they’re contacted by their supplier, the process is likely to experience hiccoughs and push back.

So how can energy suppliers ensure that consumers remain aware and willing when the time comes to receive their new meter — and take all the necessary steps prior to installation?

HOW CAN SUPPLIERS ENCOURAGE ADOPTION?

There’s a double edged sword here.

First, how can energy companies encourage business owners to upgrade?

Many suppliers have signed up to the Ofgem approved Smart Metering Installation Code of Practice — to show their commitment, and have circulated content of their own to put to rest any ambiguities and concerns about smart meters and their benefits.

But is that enough? Data transparency is also another talking point. It needs to be made crystal clear where, how and why suppliers will use smart data in the future. Data privacy is a growing concern in these digital times. It’s important to get it right from the start.

And how about encouraging upgrades with incentives? There’s no reason why suppliers can’t take inspiration from promotional marketing. Offering entry into a prize draw could be a real deal clincher. The prize? A year’s free energy for one business. Bet that’d get their attention.

Second, how can energy companies encourage consumers to fulfill what’s required of them?

It may not seem like it, but 2020 isn’t all that far off.

With pressure from the Government to hit targets, suppliers have a massive project on their hands, one that’s going to cost time and money — especially if consumers forget or deliberately avoid pre-arranged installation dates.  

Domestic users are also required to check the location of their meters ahead of installation and notify their supplier if they aren’t accessible. It is pre-emptive actions like this that make all the difference when it comes to executing a conversion project.

Once again, incentives and rewards may well be the answer. Suppliers could offer low value high-street gift vouchers to all those who engage with the installation process and help to see it through first time round. Perhaps again with entry into a free prize draw.

Or maybe an instant discount on their next energy bill?

THE CONTEXT OF ROLLOVER CONTRACTS

Back in 2011, telecoms regulator Ofcom put the kibosh on what are commonly known as rollover contracts. The move was taken to alleviate roadblocks to effective competition in the market and prevent service providers from backing bill payers into a corner.

The practice of automatic renewal has been a contentious one for quite some time now.

Consumers and businesses across the UK have found themselves unknowingly locked into another year-long contract without consent and then forced pay their way out.   

In fact, some have found themselves faced with much steeper payments. Once they’ve been rolled over, swaying ‘new customer’ discounts are removed and harsh rises in pay rates put firms and families in financial dire straits.

Ofgem, have since taken similar measures to mediate equal opportunity in the utilities market and prevent users from being duped into legally binding, one-sided agreements, with no additional financial benefit.  

IT’S ALL SWINGS AND ROUNDABOUTS

With Ofgem reporting that business utility bills (gas and electric) equate to a massive 25% of all operating costs, price hikes can do more than leave companies a little out of pocket.

But with suppliers already having to give customers 42-49 days notice ahead of their contract renewal, some may be wondering what more they can possibly do to encourage bill payers to engage with their contracts and understand the process.

“Those that have read their contract documents in detail are more likely to be satisfied with their clarity and length. This suggests that among those rating the document negatively in these respects, it is the fact that they have not examined the document in detail, rather than deficiencies in the document itself, that is at the root of dissatisfaction.” — Ofgem

Notably, most businesses whose previous contract was extended or rolled-over (90%) were aware of this occurring at the time — which would suggest that the remaining unwanted rollovers were down to disengagement or oversight.

HOW CAN SUPPLIERS ENCOURAGE RENEWAL?

Like it or not, consumer rights now dictate that bill payers have every chance to shop around before making the decision whether to stick or twist with their current supplier.

While the situation seems daunting, energy companies shouldn’t feel too hard done by. Flash sales and targeted promotional campaigns aimed at current customers can prove effective, so long as the mechanics are executed efficiently and the prizes are relevant.

And there’s always a chance to go deeper than that. Social Annex report that it can cost up to 500% more to retain a customer than it does to acquire one. So perhaps it’s time for suppliers to put more emphasis on loyalty by proving their worth and showing consumers they care.

This is about giving back, and giving consumers a real reason to renew when it comes to the end of their contract.

 

“Businesses that take meaningful steps to drive customer loyalty are 88% more profitable than their competitors who do not.”

One solution is launching a loyalty program that offers relevant, personalised rewards that can be redeemed digitally. Stuck between rewarding new customers and trying to keep hold of current one — why not do both? It makes business sense.

So, what about businesses?

With growing awareness and savviness concerning the logistics of energy contracts, nearly two thirds of all businesses (64%) report they switched gas or electricity supplier in the last 5 years.

This is a big issue for suppliers, as business clients carry far more financial weight.

“The contract renewal point is a critical time for reviewing supply arrangements. Hence the importance of the contract renewal notification in terms of encouraging businesses to be proactive in pursuing better deals.”  — Ofgem

It seems that communication is key when it comes to business contracts.

Keeping a consistent, open line of between supplier and customer is vital. Suppliers need to find ways to keep their customers engaged, informed and aware throughout their contract, so when it comes to the renewal notification, they know where they stand.

And once these groundworks are laid, there’s bags of opportunity to build on customer satisfaction and positive relationships with renewal rewards and incentives. Businesses are likely to shop around whatever the situation, but current suppliers have the chance to appeal to customers directly before they choose to jump ship.

Whether that’s with a price match promise, loyalty rewards schemes and/or the new ‘unlimited tariffs’ – with the latter giving users uncapped energy usage for a year for a fixed price.

SMART METERS, SMART CONTRACTS, SMART SUPPLIERS

The new face of utility billing is still a work in progress. While rollover contracts bite the dust and empowered consumers exercise their right to switch as they wish, smart meter integration will accelerate before the end of the decade.

These aren’t easy times for national suppliers, but there’s still plenty to be optimistic about.

One thing’s for sure — investing more time into customer relationships, communication and experience will go a long way. After all, there’s a lot to be said about loyalty.