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The Topic: Non-traditional business models UTILITY WEEK | 22ND - 28TH JULY 2016 | 11 Licence Lite is an option that helps new suppliers enter the electricity supply market. It lets a new entrant partner with an existing supplier to take responsibility for some of the more costly and technically challeng- ing parts of a supply licence. The Greater London Authority is the highest profile organisation sell- ing energy via the Licence Lite mechanism. "Markets that open up options create scope for companies to choose, for example, whether they do things themselves or contract with others who may be able to do things better, more innovatively, more efficiently." Cathryn Ross, chief executive, Ofwat BRISTOL ENERGY MANAGING DIRECTOR PETER HAIGH WRITES ON NON-TRADITIONAL BUSINESS MODELS PROFILE: Ebico, the social enterprise Ebico follows a similar model to Welsh Water insofar as it is a not- for-profit company. The energy supplier, based in Coomb near Oxford, offers just one tariff for gas and one for electricity to all its custom- ers regardless of their payment method. It is also a registered social enterprise and is therefore free to pursue its social and environ- mental goals without having to generate a return for investors. Revenue just has to cover costs. Ebico also offers plans tailored to meet the needs of financially vulnerable customers on prepay- ment meters. It holds over 30 contracts with housing associations and the company's main focus is reducing fuel poverty. To that end, all surplus profits go to the Ebico Trust for Sustainable Development to improve energy efficiency in poor households. Ebico has been in busi- ness for more than 15 years and currently provides energy to more than 60,000 UK house- holds. The energy retailer has a white label agreement with SSE, which provides both its energy and the account management services. REGULATORY VIEWPOINT Ofwat and Ofgem have taken similar stances when it comes to non-traditional business models (NTBMs). They want to see them flourish and are seeking to remove any barriers which may hamper their develop- ment. In both instances, the main way in which the regula- tors hope to make way for more NTBMs is by adopting principles-based regulation – an approach that moves away from prescriptive, tick-box compliance with a complex set of rules, and towards a more flexible regime in which interpretation of the "spirit" of regulation is allowed. Such an approach does pose challenges for regula- tors charged with protecting consumer interests, and early last year Ofgem put out a consultation to explore the transformative potential of NTBMs, as well as the potential challenges and risks they might pose. There is no solid outcome from this consultation yet, but broadly speaking there seems to be a view that the benefits of accommodating NTBMs outweigh the potential risks. Speaking at Utility Week Live, Ofgem chief executive Dermot Nolan said he expects the "energy landscape to be transformed" in the next decade – and he was not just referring to the supply market. The world of transmission and distribution is also changing fast and Ofgem is closely involved in work to identify regulation and market structures that are holding back new technologies and modes of system operation – like energy storage. A list of barriers to energy storage which Ofgem and government will reform is expected by the end of the year. Ofwat's plans to open up the water sector to more competition, as set out in its pro-market Water 2020 document, could also lead to NTBMs taking hold. Ofwat chief executive Cathryn Ross says that opening up markets such as sludge will give companies more choice about how they define their core competencies and should also lead to a bigger role for third parties in delivering customer value. Meanwhile, the opening of the non-domestic water market is having a very direct impact on water company business models. Companies have been required to restructure or entirely split off their new retail busi- nesses – or to exit the market as Southern Water, Ports- mouth Water, and most recently Thames Water, have done in order to concentrate on other market segments. Utilities are changing, and the regulators are chang- ing too. Their focus is now on creating freedom to inno- vate while keeping a beady eye on customer interests. LICENCE LITE "The old stereotype of boring old utilities doing the same this in the same way for years no longer holds true." Dermot Nolan, chief executive, Ofgem Generation Licence Lite supplier Consumer Electricity Information Money SLC 11.2 codes Key Public distribution network Third party licensed supplier ✓ ✘ "You can't pretend to be different and then do the same as everyone else. We want to reach out to as many custom- ers as possible and so, very early in our life, we opened the Bristol Energy Hub - right in the heart of Bristol." To read the full blog, visit: http://bit. ly/29IZcsC