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UTILITY WEEK | 20TH - 26TH MARCH 2015 | 25 Finance & Investment I n January, much of the energy industry was focused on the outcome of the first capacity auction. But one group that may not have given it the same level of attention was the asset managers of the thousands of industrial and commercial sites across the country. One surprise was the volume of small engines suc- cessful in getting 15-year contracts – a total of more than 700MW. These are the same type of engines that are kept as back-up generators for nearly all the commercial, industrial and public sector buildings in the country. Dampening of penalties in the capacity market, coupled with the low entry capacity threshold at 2MW, removed the major barriers to entry for small back-up generators. What should be of interest to asset managers is how the capacity market differs from the existing plethora of balancing services available to small generators. Where factory owners were previously put off by contracting complexity, revenue uncertainty and the administrative burden of the Short Term Operating Reserve (STOR), the capacity market is a fixed payment that is contracted through rolling auctions. Similarly, where asset managers were reluctant to allow their diesel engines to run for hundreds of hours in the year, capacity market capacity is likely to be called upon infrequently. If asset managers can negotiate the auction process, the low-risk returns offered are attractive. Take an asset manager with four buildings and assume each has a 500kW back-up engine with remote access. In the capacity market auction, these engines could have been aggregated to get a fixed payment of £35,000/year for what would be little invest- ment and minimal ongoing cost. This same operator can then get further revenues by switching on during the TRIAD periods. If done correctly, this could give an extra payment of £60,000/year. Very quickly, and with limited contracting complexity, these under-utilised engines are generating £95,000 a year and all for less than 50 hours, generating with assets that would have otherwise been unused. These engines would have multiple other balancing services available to them, which if optimally contracted for throughout the year give additional upside – albeit with additional contractual complexity. The concept of using back-up generation is not a new one. What has changed is the contracting complexity, which was previously across multiple opaque revenue streams with different counter-parties. Eamonn Boland, senior consultant, Baringa Partners "If asset managers with back- up engines can negotiate the auction process, the low-risk returns offered by the capacity market are attractive" Investor view Eamonn Boland Owners were previously put off by contracting and revenue uncertainty satisfaction survey published in January, Npower was still rated the worst for com- plaint handling and customer service, scor- ing a meagre 35 per cent. This was closely followed by Scottish Power with a score of 41 per cent. EDF and British Gas scored slightly higher with 49 per cent, while Eon and SSE both scored 50 per cent. But the household market is not the only segment of the Npower business on which Massara will be judged, and in many ways "it is the anomaly", the spokesman said. Npower sells twice as much energy to business suppliers as to residential users, and while its residential business has hem- orrhaged numbers as a casualty of rising switching rates, the business supply side has seen the opposite. B2B energy supply is an increasingly competitive market requiring strong relation- ships and bespoke solutions. In this arena the supplier is gaining market share, with its base growing 6 per cent last year while all other suppliers held their position or lost market share. The aim is to mirror this success in the more visible household market in time, but Npower is unlikely to achieve this according to Massara's timetable. The spokesman admitted that he would be "very surprised" if the supplier manages to reach the top spot for customer service before the end of the year. "But this shouldn't be taken as a failure," the spokesman said. "It was always an aspi- rational target. And we won't stop working towards it until we are there." customer service areas who can offer support to our frontline advisers in resolving a com- plaint during the first contact with a customer. They also offer one-to-one coaching and the role is allocated to a single team of advisers, which improves our ability to resolve more complex queries while the customer is on the telephone," Meredith says. To deliver on the plan, Npower has put in place its New Way of Working programme to transform the company's internal methodology. The strategy includes a voluntary and growing customer feedback panel process as well as a focus on performance management, organisa- tion and skill, mindset and behaviours and process efficiency. To date, around 2,000 employees have been though the internal programme – with a further 400 currently undergoing training. Some of the key numbers from RWE Npower's financial results announcement last week. £309m RWE Generation's loss in 2014 for its UK power fleet £183m A 2014 profit of £183 million was still down by a quarter on £246 million in 2013 £126m Combined loss on RWE's UK generation and supply busi- nesses 6% Drop in residential household customers 6% Rise in number of business customers THE BIG NUMBERS ➟ ➟