Utility Week

12 | MARCH 2023 | UTILITY WEEK Interview continued from previous page with very serious illnesses, they want that flexibility and that control over their income. "It's this lazy, middle-class assumption that prepay is bad. It isn't. And if you actu- ally speak to our customers you'll hear that time and time again." Cost to serve Bullen admits that in an ideal world, customers on PPMs would not be paying a higher rate than those on direct debits but he points to the considerable difference in the cost to serve. Rather than a single monthly transaction, PPM customers can vend multiple times per week, but Bullen says "the really big difference is the call rates". This is why Utilita's business model is centred on smart PPMs and encouraging customers to self-serve via its app, which was developed in-house. However, Bullen admits that smart technology in isolation will not cut costs and in the short term might actually increase them because of the new functions it offers customers. They include requesting a "Power Up" emergency credit, which has been accessed 1.7 million times by Utilita customers to date. This was a feature Bullen was inspired to add a‡er hearing testimonies from custom- ers that had been forced to seek payday loans to cover electricity. "It was a spiral – people who couldn't cope with their debt problems were just making them worse by paying these appalling interest rates." The success of the Power Up function, and the rela- tive decline in fortunes of the high street giants, has meant Utilita would now class as the country's third biggest pay-day lender (at 0% interest, Bullen is keen to point out), with £31 million handed out. Despite this, Utilita was reprimanded by Ofgem in December over its failure to provide extra credit to 25,000 customers, including some identified as vulner- able. The supplier agreed to pay out £830,000 in redress. Bullen has called the reprimand harsh and says Ofgem's licence conditions around additional support credit lacked clarity. Bullen adds: "I asked Ofgem whether all the other supply companies had issued these additional support credits to an accuracy of 1.5%. I didn't get an answer." Utilita was also criticised by the Department for Business, Energy & Industrial Strategy (BEIS) for low redemption rates of Energy Bills Support Scheme (EBSS) vouchers among its traditional PPM customers. The company insists it has tried its best to alert these customers and reiterates its call for a faster smart meter rollout to allow payments to be issued electronically. Bullen is not afraid to stand up for himself and has previously pondered why "we always seem to be one of the bad guys". This bullishness (for want of a better word) led to a memorable encounter on Good Morning Britain in which the visibly frustrated CEO was forced to defend himself against Susanna Reid's misinterpretation of Utilita's financial results. The presenter cited the full-year gross profit of £81 million as evidence of overall profitability, as opposed to the reality Bullen painted of losses of c£30 million a year. He sighs when I bring up the encounter. "This narrative about energy companies making huge profits is something that is so ingrained in society, it's hard to shake. But even if you go back before the CMA's inquiry, you won't actually see any of the big six mak- ing huge profits. The numbers look big because they're really big companies but the reality is they were only ever making 1% to 2% and no-one's making anything anymore. "Energy has always been a very sensi- tive subject. And it is a very politicised subject. It punches above its weight in terms of swaying people's voting intentions. Conse- quently, politicians love talking about it. "But supermarkets have always, even before CMA, been making bigger profits than energy companies. So why don't we have an investigation into the supermar- kets? It's just bizarre." The consequences of this fixation on energy prof- its have included a financial resilience crackdown by Ofgem, which is proposing suppliers meet a "minimum capital requirement", set at £110-£220 per domestic customer from the end of March 2025. "Ofgem's objectives here are completely unachiev- able and inconsistent," Bullen begins, very much as he means to go on. "They are basically price capping everyone to death and then saying you've got to come up with this massive balance sheet for us. "For Utilita, this means putting up somewhere between £100 million and £200 million on our balance sheet to meet the financial stability criteria. At a time when we're losing money. How does that work? They're not about to add £50 million to the prepay price cap. And what's my pitch to an investor? '£200 million please. By the way, I can't guarantee any return whatsoever and I might go on losing money.' It's an absolute nonsense." Returning to the current fire the sector is fighting, Bullen wants to see the new energy department and Ofgem ban the installation of legacy PPMs but implores them not to continue with the currently self-imposed ban on remote switches. He points out that switches work both ways – from credit to prepay and vice versa – and that halting the process undermines the value of smart meters. He says one of the worst aspects of the relationship between Centrica and Arvato Financial Ser- vices was the use of no-install/no-fee incentives, which he says should have been stamped out long ago (and stresses that Utilita has never used them). However, he returns to his point that BEIS and Ofgem are over-simplifying the issue. "It's easy to make bold statements but unless you're prepared to have a grown-up conversation about money the debate goes nowhere. If these customers aren't going to pay, who will? Energy suppliers are already losing money, so are people actually going to vote for an increase in their own tariffs to cover the cost of non- installation of prepay or an increase in taxes? Or are we just going to let this spiral until it gets to debt collection? "My point is, this issue is much wider than nasty, old energy companies. There needs to be a solution. But at the moment all we get is name-calling." Bullen is adamant that these solutions will be found in engaging with the kind of people who use Utilita's Energy Hubs. "There are definitely things we can do but energy suppliers can only do so much. We need targeted sup- port for the people who need it most – and yes, I'm afraid some of us are going to have to take it on the chin. "But we also have to do something about people burning 20% to 30% too much energy heating draughty homes. It's a national embarrassment and something the government needs to get to grips with." "Ofgem is price capping everyone to death and then saying you've got to come up with this massive balance sheet for us."

• Cover