Utility Week

UTILITY Week 3rd July 2015

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The Topic: TPIs UTILITY WEEK | 3RD - 9TH JULY 2015 | 7 In the domestic market, we mostly understand TPIs as price comparison sites, through which around 40 per cent of domestic supply switches are made, accord- ing to a June 2014 report compiled by Ipsus Mori for Ofgem – up from 20 per cent in 2011. That said, there are in fact a number of nuanced TPI services on offer for domestic customers looking to switch energy provider, including collective switching, providers of mobile apps and alert services for cheaper tariffs. Energy efficiency advisory firms might also be described as TPIs and, in the future, experts antici- pate that there will be a dynamic market for domestic demand aggregation services in order to facilitate more fluid demand response mechanisms across the electricity grid. In the B2B energy market, the role of TPIs is more mature than in the domestic space as many busi- nesses have long since looked to external experts for advice on the best energy purchasing strategy and the best deals available (p10). In the non-domestic market, TPIs manage around 85 per cent of large industrial contracts and their activity in the small and medium- sized business space is increas- ing steadily as energy becomes a larger component of companies' overheads. As the water sector approaches market opening for non-domestic customers, speculation has risen about the emergence of TPIs in this market too, where they could provide valuable advisory and service "bundling" support (see column, right). An increasingly complex regu- latory and policy landscape has more recently caused a prolifera- tion of "niche" TPI companies that pride themselves as much on their abilitiy to support compliance – and associated benefits realisation – as on their ability to find financial economies (p12) WHAT DO UTILITY TPIs DO? The opening of the non-household water mar- ket to competition in April 2017 will bring with it opportunities for TPIs. They are likely to be more sophisticated than typical brokers and could offer a multitude of services. Open Water (the body charged by the government with overseeing the introduction of competition) suggests that water comparison sites could spring up, with the likes of Uswitch adding to its price compari- son portfolio. This would allow businesses to assess price, much as energy customers do already. It is also likely that the market for water consultancy will become more active, helping businesses to negotiate better water contracts, though as CMR consultancy a subsidiary of Ener-G Group, warns readers on its website "choose your water consul- tancy carefully; it is unlikely that third party intermediaries will be regulated when the market first opens". Open Water says it expects more "tailored advisory services" to appear with market opening, particularly targeting water efficiency or probably a combination of energy and water efficiency – costs which are intrinsically linked. It is likely these services will be delivered increasingly on a shared benefits basis, Open Water has speculated, whereby TPIs would offer their services at a heavily discounted rate, or even free, on the understanding that they will receive a cut, usually ongoing, of the savings generated. Such shared benefits packages are already common between energy and water-intensive users, such as food manufacturers, and technology providers. They remove the need to make an investment case while offering the perks of an ongoing revenue stream. Indeed, some TPIs predicate their whole income on a share of the saving achieved. Other companies, such as SSE Water, may look to take the bundling route. SSE has joined trade association Water UK ahead of market opening, and describes the move into water as "a natural step" in growing the busi- ness. With electricity, gas, and broadband all offered alongside water by SSE, there is the potential to wrap them together in multi-utility packages. The Peel Group is another company that is already well placed to offer wider, bundled water services after market opening. The diversified group currently supplies water to Media City in Manchester as well as offering a range of other abstraction and discharge services deriving from its large portfolio of canals, rivers and docks in Manchester. Its utili- ties unit also already supports energy services for homes and businesses sited on Peel Group developments. Other companies will be similarly well positioned. As April 2017 approaches, they will no doubt be weighing up the size of the prize to be gained. MB "It would be helpful if third party intermediaries are also part of the solution [to energy industry challenges around consumer trust] and, if needed, that they are subject to the same kind of scrutiny that we are, with the same kind of constructive regulation." • Vincent de Rivaz, chief executive, EDF WATER SERVICES COULD BE ADDED TO THE MIX "Current offerings in the market seem to be more suited to large businesses that are better able to negotiate contracts that suit their needs, and are more likely to be approached by a credible broker, than the little guys." • Andrew Hallett, policy manager, Citizens Advice

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