DB Results: powering up the utilities sector
DB Results partners with businesses: to ensure they can sustainably transition from strategy to reality. Offering strategic advice and digital solutions, it leverages the latest in technology to drive successful results – and in the utilities sector, now more than ever, this means unlocking the value in data to manage risk and maximise asset and customer value.
Rooftop solar combined with efficient battery storage and smart energy management solutions represent just one of myriad ways that digital disruption is set to transform the utilities sector, and according to Matt Nidd, General Manager – Utilities, DB Results, there’s a real risk that companies who fail to innovate will be left behind.
“Technology and regulatory change effectively means that what was always a commodity – the delivery of energy – is being further commoditised . For instance, now even the residential meter data itself is becoming a commodity, thanks to the new Power of Choice initiative,” he explains. Given all components of the Retail value chain are available as a service, the barriers to entry into this market are lower than ever making it especially vulnerable to disruption.
“This leaves customers wondering: why do I need to have a relationship with an energy provider and why I can’t I buy energy with my phone plan? For electricity retailers, this means it’s essential that you know your customers better, so you can offer better value and a range of ‘stickier’ products and services. And you can only do that by having rich data to leverage.”
Deriving value from data, unsurprisingly, is where the utilities sector has its focus, and it’s where DB Results can step in as a digital integration partner, offering advisory and implementation services.
With the impending commoditisation of mass market metering in Australia, DB Results is helping many key players in the industry to develop clear strategies to meet the next wave of change: Power of Choice.
As the Australian electricity market continues to evolve, Power of Choice will drive a further call-to-action and associated step change in churn, one of the energy industry’s bedrock components.
“The data available from this meter is incredibly powerful… The value is clearly going to be in the data, as it allows market participants to drive meaningful insights, so they can create a better customer experience and manage energy supply more efficiently,” Nidd says.
While Power of Choice will challenge utilities distributors’ traditional, regulated funding model, it also opens up many opportunities for new market entrants and those retailers who are ready to innovate with new service lines.
“Power of Choice is effectively about enabling customers to have more granular access to energy usage information, so they can make more informed decisions and ultimately reduce consumption and manage cost. . This is facilitated by enabling retailers, rather than distributors, the opportunity to offer consumers a smart meter bundle – including a way to view that data, such as an online portal presence where they can look at that data and make decisions about usage,” Nidd says.
“Obviously, it’s beneficial to everyone to use less power and put less pressure on the grid overall, and this process starts with the data. Data is at the core of everything. Consumers can use this data to look at shifting usage and moving to ‘time of use’ offers. With access to this kind of data retailers, can overlay other energy related products and services such as energy efficient appliances, bundled solar and storage and even insurance to create a deeper relationship”.
As an industry thought leader, DB Results aims to leverage its utilities experience in this challenging marketplace, to help energy providers develop options for a Power of Choice response strategy.
It’s already a very competitive marketplace and according to Nidd, it’s about to become even more crowded – and much more disrupted.
It’s those utilities providers who are ready to innovate and who embrace a more flexible business model that will survive and thrive in the long term, he adds.
“Being an energy retailer is becoming less of a specialised field and now with this detailed data stream available, I think the large amount of infrastructure around traditional retailers will become a less sustainable business model,” he says.
“Adding to that, we’ve still got over 20 percent customer churn in Victoria and we’re likely to see churn in New South Wales ratchet up with Power of Choice, as it creates a new call to action. Customers are not sticky in this sector. At the same time the cost to acquire and the cost to service are going up, while the profits are going down. It’s only going to get more competitive.”
The immediate solution to this is for retailers to become savvier with their offering.
Those who think outside of the box to deliver bundled energy, gas and solar products, or who offer more services overall, stand to benefit most, as the traditional retail tariff model will only appeal “as a very low value product”.
“Some of the more innovative retailers are doing really interesting things, like allowing consumers to pre-buy energy. There are energy clubs, where you pay a $20 per month membership and in exchange, you get access to wholesale rates. There are other models that we’re seeing out where people are being incentivised to use less energy to get discounts on other goods and services,” Nidd says.
“Being able to manage such a diverse and value-driven range of products, more easily, with richer data and via a digital portal, means that the traditional model will change materially.”
In order to meet the complex and ever-changing needs of their client base, DB Results works with a select group of key partners which Nidd describes as “key to our strategy”.
“One is a platform as a service named OutSystems – it’s a powerful a rapid application development platform that really underpins our digital play,” he says.
“Our customers have for years been working with large transactional systems and they all want and need to respond to the customer experience by having a digital presence, and we saw this as a great solution.”
The white labelled SelfServe.Cloud product leverages OutSystems to offer a best in class response for retailers wanting to offer integrated customers self-serve and energy efficiency capability without the overheads of being coupled to traditional customer care and billing solutions.
The second is Bit Stew Systems, creators of the market-leading platform for Software Defined Operations for the Industrial Internet, which sets out to improve utility operations and asset performance in the fields of smart metering and smart grid operations.
“For our customers, who are wanting to leverage the large volumes of data in their transactional systems for better asset and customer outcomes, Bitstew has demonstrated a superior data integration and visualisation capability. This is especially so for utilities. Coupled with our services partner OSI and their deep data integration and analytics background we are particularly excited about the future of this offering” Nidd says.
Where we are helping our customers with an end-to-end approach to remediating or developing complex meter and communications solutions our partner Operational Technology Solutions (OTS) have enabled us to have the market leading engineering capability required to be successful in this space. This has been particularly evident in OTS’s ability to remediate a complex point-to-point metering communications solution whilst simultaneously overlaying a contingent solution and trialling market leading data acquisition capabilities across both technologies.
We are confident that the ecosystem we have developed with these partners positions us well to support our customers to change their businesses sustainably, now and in the future.
Ofwat allows retailers to raise prices from April
Retailers can recover a portion of excess bad debt by temporarily increasing prices from April 2022, according to an Ofwat statement.
The regulator confirmed its view that levels of bad debt costs across the business retail market are exceeding 2% of non-household revenue, thereby allowing "a temporary increase" in the maximum prices. Adjustments to price caps will apply for a minimum of two years to reduce the step changes in price that customers might experience.
Measures introduced since March 2020 to contain the spread of Covid-19 could lead to retailers facing higher levels of customer bad debt. Retailers’ abilities to respond to this are expected to be constrained by Ofwat strengthening protections for non-household customers during Covid-19 and the presence of price caps.
In April last year, Ofwat committed to provide additional regulatory protection if bad debt costs across the market exceeded 2% of non-household revenue.
Georgina Mills, Business Retail Market Director at Ofwat said: “These decisions aim to protect the interests of non-household customers in the short and longer term, including from the risk of systemic Retailer failure as the business retail market continues to feel the impacts of COVID-19. By implementing market-wide adjustments to price caps, we aim to minimise any additional costs for customers in the shorter term by promoting efficiency and supporting competition.”
There are also three areas where Ofwat has not reached definitive conclusions and is seeking further evidence and views from stakeholders:
- Pooling excess bad debt costs – Ofwat proposes that the recovery of excess bad debt costs is pooled across all non-household customers, via a uniform uplift to price caps.
- Keeping open the option of not pursuing a true up – For example if outturn bad debt costs are not materially higher than the 2% threshold.
- Undertaking the true up – If a 'true up' is required, Ofwat has set out how it expects this to work in practice.
Further consultation on the proposed adjustments to REC price caps can be expected by December.
"While it’s great that regulators are helping the industry deal with bad debt in the wake of the pandemic, raising prices only treats the symptoms. Instead, water companies should head upstream, using customer data to identify and rectify the causes of bad debt, stop it at source and help prevent it from occurring in the first place," she said.
"While recouping costs is a must, water companies shouldn’t just rely on the regulator. Data can help companies segment customers, identify and assist customers that are struggling financially, avoiding penalising the entire customer in tackling the cause of the issue."
United Utilities picks up pipeline award
A race-against-time plumbing job to connect four huge water pipes into the large Haweswater Aqueduct in Cumbria saw United Utilities awarded Utility Project of the Year by Pipeline Industries Guild.
The Hallbank project, near Kendal, was completed within a tight eight-day deadline, in a storm and during the second COVID lockdown last November – and with three hours to spare. Principal construction manager John Dawson said the project helped boost the resilience of water supplies across the North West.
“I think what made us stand out was the scale, the use of future technology and the fact that we were really just one team, working collaboratively for a common goal," he said.
Camus Energy secures $16m funding
Camus Energy, which provides advanced grid management technology, has secured $16 million in a Series A round, led by Park West Asset Management and joined by Congruent Ventures, Wave Capital and other investors, including an investor-owned utility. Camus will leverage the operating capital to expand its grid management software platform to meet growing demand from utilities across North America.
As local utilities look to save money and increase their use of clean energy by tapping into low-cost and low-carbon local resources, Camus' grid management platform provides connectivity between the utility's operations team, its grid-connected equipment and customer devices.