Utility Week

UTILITY WEEK | 28TH SEPTEMBER - 4TH OCTOBER 2018 | 11 Policy & Regulation Which?'s August list – with two of the cheap- est tariffs – says the reason it can offer such low prices is that it leverages new regula- tions that allow it to buy energy in 30-min- ute slots. "This means that, when we install smart meters for our customers, we get very precise data on how much our customers consume and therefore can buy precisely the amount of energy needed. This speaks to the core idea of our business: we don't waste money buying more energy, and thus we pass that saving on to the customer," says Ana Nanu, a business analyst at Usio. The company also says a robust focus on customer service will be key to its sur- vival. "The reason Iresa got shut down was because its customer service was not meet- ing customer needs at all. Usio puts cus- tomer service at the heart of the business. We are very aware that customers are the most important factor in a business, and we do our best to offer good service." Meanwhile, Eversmart Energy, another supplier on the Which? list, points to a dif- ferent strategy, though gives scant details. Chief executive, Barney Cook, says it plans to survive by using the smart meter rollout to "inject cash into the business to supplement its negative gross margin tariffs". Baringa's Thomson suggests that one way of firms leveraging the smart meter rollout is to become asset managers – where they own the smart meters and rent them to other suppliers. However, he cautions, the market for this is "quite small currently", and the opportunities limited. "They would have to ensure they created a very large asset base in order to make it worthwhile." Another way he suggests small suppliers could try and weather the storm would be to take advantage of variances in the types of customer profile. "Many domestic customers look the same in terms of customer profile," he explains. "A company could capitalise if it found customers with different shapes, which it could use to trade differently in the market. But it's not easy to find customers with beneficial shape." The big question is the impact on the looming price cap – where opinions are divided. Simon Virley, partner and head of energy and natural resources at KPMG says: "The price cap will present significant chal- lenges for the larger suppliers in terms of the need to cut costs. But for smaller suppliers it presents an opportunity to attract customers by using their lower cost to serve and target- ing specific market segments." "It will be interesting to see the effect the price cap has on the smaller end of the mar- ket. It could result in a drop in switching," NUMBER OF ACTIVE DOMESTIC SUPPLIERS BY FUEL TYPE HOW THE NUMBERS STACK UP ELECTRICITY PRICES (DAY-AHEAD BASELOAD CONTRACTS, MONTHLY AVERAGE) GAS PRICES (DAY-AHEAD BASELOAD CONTRACTS, MONTHLY AVERAGE) AVERAGE TARIFF PRICES BY SUPPLIER (SVT AND FIXED DEFAULT VS CHEAPEST) 80 70 60 50 40 30 20 10 0 70 60 50 40 30 100 85 50 25 0 Number of active suppliers £/MWh pence/therm 1,250 1,000 750 500 250 0 Average annual tariff in the last quarter Suppliers' annual average fixed term default tariff Supplier's average annual standard variable tariff Supplier's cheapest annual average tariff Market cheapest annual average tariff British SSE Eon EDF Scot Npower First Ovo Uitity Co-Op Gas Power Utility Energy Energy May 2010 Mar 2011 Dec 2011 Oct 2012 Jul 2013 May 2014 Feb 2015 Dec 2015 Sep 2016 Jul 2017 Apr 2018 2014 2014 2015 2015 2015 2016 2016 2016 2017 2017 2017 2018 Dec 2004 Dec 2005 Dec 2006 Dec 2008 Dec 2009 Dec 2010 Dec 2011 Dec 2012 Dec 2012 Dec 2013 Jun 2014 Sep 2014 Dec 2014 Mar 2015 Jun 2015 Sep 2015 Dec 2015 Mar 2016 Jun 2016 Sep 2016 Dec 2016 Mar 2017 Jun 2017 Sep 2017 Dec 2017 Mar 2018 continued overleaf Gas Electricity Gas and electricity Total Source: Ofgem Source: Ofgem Source: Ofgem Source: Ofgem

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