Why only utilities that go digital will survive
Gone are the days in the utility industry where the consumer thought no more about their energy consumption than when it came time pay the bill. Today, with myriad apps and portals on the internet, many energy consumers have become “prosumers,” according to Greentech Grid.
Consumer engagement with utilities through digital means has significantly affected their attitudes and outlooks. According to a survey by Accenture, consumers who take advantage of the digital opportunities their utilities afford them trust their energy provider to help them optimize their energy consumption.
This means that the utilities who offer digital services have a competitive edge over those who don’t.
Digital consumers are generally happier and more satisfied with their utility service. A poll of more than 11,000 energy consumers in 21 countries revealed that nearly 70 percent of digital consumers are satisfied with their energy provider—14 percentage points higher than those who do not use digital channels. Furthermore, 42 percent of digital consumers say they would recommend or promote their utility, versus just 13 percent of non-digital users.
Utilities have new competition due to digitalization as well. Having tried the rewards and benefits of digital technology, consumers are beginning to expect high levels of freedom and flexibility with their home energy use. As rooftop solar, electric vehicles and battery storage become more prevalent, consumers are becoming more and more proactive and assertive. Simultaneously, Apple, ADT, Google, Samsung, Verizon and Wal-Mart are teaming up with new and existing hardware and software companies to create new home energy management solutions.
Still, utilities have a competitive edge because, currently, they are more trusted than their competitors. It’s not too late for them to create new revenue by offering digital solutions, like solar, energy-efficiency tools and programs, or bundled home services. In regulated markets, utilities can get involved in innovative partnerships or digital information services.
The connectivity of energy and everyday devices, like the refrigerator, is dramatically increasing the amount of personal information regarding consumer habits. Utilities can jump on this, by ensuring their customers’ data privacy. Consequently, they can use the information they collect to develop more personalized products and services.
Quoted in Greentech Grid, Global Managing Director of Accenture Energy Tony Masella drives home this last point. ““In fact, they must do this to remain competitive, given that barriers to entry are coming down and utilities must now compete with startup digital retailers and new entrants from other industries, which are offering new and bundled solutions and services,” he said.
Traditional utility companies that are not digitalizing yet must start now. The ones that have started need to improve their digital services and platforms. “41 percent of survey respondents said their digital experience with their energy provider was fraught with more difficulty than their dealings with other types of providers,” reported Greentech Grid.
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.