Utility Week - authoritative, impartial and essential reading for senior people within utilities, regulators and government
Issue link: https://fhpublishing.uberflip.com/i/689907
6 | 10TH - 16TH JUNE 2016 | UTILITY WEEK People & Opinion Wholesale volatility will be a challenge Independent suppliers are mindful of the risk that if prices shoot up, they will need to hedge the gap. Question & Answer Luke Watson, managing director, GB Energy Supply GB Energy Supply entered the market in 2014, establishing itself with the cheapest fixed rate deal on the market, and fiercely speaking out against price comparison websites, positioning itself as a force to be reckoned with. Around 30 other independ- ent suppliers are also compet- ing for customers against the mighty big six, but founder Luke Watson told Utility Week what incumbents must do to survive and why it is too late now for new entrants. Q: What were your concerns when you first set up GB Energy Supply? A: We've always wanted to acquire customers quickly for financial security. What I looked at right at the outset was the big six. All are carrying hundreds of staff, but to my mind, there was a busi- ness opportunity there to have a very streamlined business model where all the heads of departments are in head office managing outsourced suppli- ers and agencies. We have 16 staff directly employed for our 200,000 customers. We can very tightly grow as we need to grow, there's plenty of visibility and it is working so far. I think as a new entrant coming in now, they may have missed the curve. Unless they're going to be cheap, cheap, cheap, they may be six months too late. We've been fortunate with the time we entered the market. Q: What are the challenges of setting up an independent supplier? A: We have been fortunate in wholesale costs and I think the challenge for independent suppliers will come when there is volatility in the wholesale market. That is when the hedg- ing strategy comes into play and we are very conscious of that because it is our biggest risk at the moment. It is a tricky one but it's that gap between something happen- ing, prices shooting right up and how we can hedge that gap. It is a risk and we are monitoring prices three times a day. Q: What does the smart meter rollout look like from an independent supplier's perspective? A: I am actually looking forward to smart. I just don't like all the pain we have to go through to get there. I would be leaning towards 80 per cent coverage because I don't think we will get to 100 per cent by 2020 at all. I think 60 per cent is a great number… [laughing]. We will be fitting smart meters with our own installers. I've got good contractors that I trust and have known for seven or eight years that are willing to diversify into smart metering and are willing to train up more people on the ground because of the relationship we've got. We are ready for any skills shortages. Q: What did you think of the provisional outcomes from the CMA? A: I don't think the data sharing will happen. The big six will push back on that massively. The price comparison websites (PCWs) seem to have done quite well out of it. We are very much against comparison sites and paying for comparison sites. They don't show us because we are not commission paying but 60 per cent of suppliers are not paying commission and therefore are not being shown by default. Q: What would you have liked to have seen come from the CMA findings? A: The CMA was watered down because of peer pressure. They obviously want to promote switching and savings for con- sumers but I feel they have just identified the PCWs as the only vehicle. By going down the PCW route they are playing against the independents. I really am strongly against what they've done with PCWs. We will be going back to the CMA with that response. "Renewables alone is not a panacea so we need to be more pragmatic about the opportunities, stability and prosperity we can generate from new nuclear and fracking sources" Gary Smith, GMB Scottish secretary.