Utility Week

UTILITY WEEK | 11TH - 17TH OCTOBER 2019 | 29 Customers The dawn of a new era If Ovo Energy's proposed takeover of SSE's retail business goes ahead, it will be a game-changer and mark a coming of age for the competitive retail energymarket. View from the top Ted Hopcroft, energy expert, PAConsulting T here are decades where nothing happens; and there are weeks where decades happen." Boris Johnson's senior adviser Dominic Cummings is apparently fond of this Lenin quote on the rapidity of change – and we may well be seeing this in the energy market. A• er over 15 years of dominance by the big six, in the past few weeks we have seen Ovo's proposed acquisition of SSE and the announcement of Innogy SE and its asso- ciated Npower operation. Does the Ovo acquisition mark the point at which the gradual erosion of the big six tips us over into a new type of market? Good news for the market This is positive news for a market where there have been concerns about many companies' longevity and ability to make money. Several of the big six are rumoured to have been actively considering exit and Centrica's recent results again highlighted theirŠchallenges. An energy seminar in September estimated that failed suppliers have cost creditors £78 million and there are worries that market activity focuses on engaged custom- ers who switch and switch again, while "sticky" custom- ers remain stuck. Against this backdrop, Ovo is a young, agile, suc- cessful company that has demonstrated that it believes passionately in the market and in all types of customers, and challenges other suppliers to raise theirŠgames. Good news for customers The proposed acquisition should also be positive news for customers. A company built on the green energy agenda, excellent customer service – it has been named best Uswitch supplier for four out of " ve years – and innovative proposi- tions on whole energy manage- ment, is moving " rmly into the massŠmarket. This is good for the govern- ment's goals to green our energy supply and deliver net zero carbon by 2050. More marketing of and accessibility to these proposi- tions can only help stimulate awareness and market push so the required regulatory and physical infrastructures are in place. The risks are that Ovo could become embroiled in try- ing to integrate a monolithic supplier and discovering that its innovative o˜ erings fail to resonate with SSE's sticky customers and we end up with a big six again, but one will have a di˜ erent name. Challenges for Ovo Ovo certainly faces signi" cant challenges. Whole energy provision provides the opportunity to build a more meaningful and long-term relationship with customers; but how does this approach, which requires installation of expensive assets, " t into a world of next-day switch- ing, where Auto Sergei o˜ ers to automatically š ip you to the bestŠdeal? Second, Ovo will have to work hard on its new cus- tomer base. SSE has lost one third of its customers since 2010 and they are likely to be those who are engaged with and active in the market – exactly the type of cus- tomers who would be receptive to Ovo's innovative o˜ er- ings. Those who remain may be harder to win over. Third, there is the integration headache – how to eat the elephant. There will be major work needed on branding and organisation, and aligning SSE's sta˜ with Ovo's culture and approach and, of course, IT and data. SSE currently uses a customer service and bill- ing solution that was originally implemented in the nineties, migrating this to its own systems must avoid any impact on customer service that could damage theŠbrand. The future holds innovation It should be possible to solve these challenges and the extension of the smart meter deadline removes one com- pletely unrealistic burden. Ovo's vision is in line with that of the Department for Business, Energy and Indus- trial Strategy and with Ofgem's approach as they con- sider pilots and supporting regulatory infrastructure, and as other suppliers see an opportunity for market transformation. Companies from Octopus, with its half-hourly pric- ing trial, to British Gas's plans to use its customers' hot water tanks to create a virtual power plant, are introduc- ing innovation. While Ovo will have a mountain to climb if the acqui- sition goes ahead, on the other side the new dawn will bring bene" ts to customers, to the vibrancy of the energy market and to the UK's carbon ambitions, and we should wish them success with it.

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