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Mind the Gap
As published on Energy Live News
The drive for greater transparency and improved customer experience – along with cheaper bills – is at the heart of the unprecedented scrutiny facing energy suppliers. Despite industry initiatives to reduce the number of tariffs on the market and make energy simpler, customers still bemoan inaccurate bills and lengthy switching times.
Despite branding and product launches that highlight their customer focus, if energy suppliers are to truly become customer-centric and improve their service, they need to fundamentally change their approach to data management.
The biggest problem holding suppliers back is data. There’s a lot of it, it often goes wrong, it is the major cause of customer complaints and it can be incredibly difficult to fix.
The whole energy industry is reliant upon a large number of complex messages being passed between the various parties that are involved in getting energy across the network and to the homes and businesses that use it. Individual data flows detail every event against a meter, from changes of supplier to the recording of actual consumption data. These complex messages make up the information required by energy suppliers to manage a customer’s energy supply, so they know what has been used and therefore, in turn, how much their bill should be.
However, legacy systems, the history of merger & acquisition activity and consolidation since privatisation – along with under-investment – have all resulted in a disparate web of barely connecting processes across the industry.
Without an efficient operating model, suppliers will struggle to achieve the reduced switching times that government has challenged them to meet by the end of the year, and generating accurate bills will continue to be a challenge that triggers thousands of customer complaints every year. With the full roll-out of smart meters edging closer, the volume of data flows is only going to increase – suppliers can’t afford to ignore the data problem.
The financial impact of not being able to fully reconcile customer data could also run into hundreds of millions of pounds – meaning suppliers could significantly reduce operational costs too. And at a time when external pressures are increasing the cost of energy across the Big Six, reducing overheads and revenue leakage could make all the difference to competitive pricing models.
Put simply, a lack of transparent and effective data management across the industry is the single biggest problem preventing suppliers from truly getting it right for their customers.
Every energy supplier needs a robust and organised system for capturing and managing all of their data flows, so that problems can be identified – and resolved – before they incur a financial impact.
The majority of suppliers tackle data from the top down, using aggregated views and assumptions to manage their positions. It’s only later down the line that they try to reconcile at a customer-level what they’ve been charged for supplying energy to a property, against what that property has actually been billed for. Often, this results in a disparity between purchased and consumed energy. This gap – often referred to as the ‘settlement gap’ – can amount to identifying a significant P&L risk and potentially a far greater recovery opportunity, often to the tune of hundreds of millions of pounds. Customers could have been over-billed or under-billed for long periods, resulting in financial impact on suppliers and the issue of ‘bill shock’ where customers suddenly receive unexpectedly high bills on the doormat and sudden changes in payment plans.
To prevent these imbalances ever becoming an issue, suppliers need to take a bottom-up approach in order to get an accurate view of their true settlement position. This isn’t a revolutionary attitude, it’s simply good practice. Basing demand forecasts and purchasing strategies on pure assumption-based profiles is both out-dated and risky.
The need to take control of data is becoming increasingly urgent. Government has called on energy companies to halve the length of time it takes to switch suppliers, yet this will prove a significant challenge for those suppliers still reliant on their legacy practices: without a transparent and accurate view of customer data, suppliers find it hard to track the switching process for individual accounts and rectify any exceptions, bottlenecks or issues that could be hindering the process.
Smart meters are painted as the panacea to billing and switching issues, yet under Smart the volume of data will increase to literally millions of data flows every day. If suppliers don’t have a smart operating system, they won’t be able to manage the data or enjoy the opportunities it presents.
Data is the foundation on which the energy industry lies, so good data management is fundamental to a supplier’s success. As suppliers are pushed towards more transparent accounting practices, faster processes and increasing amounts of customer data, this issue is becoming ever more pressing.
In the same way that recent years have seen suppliers differentiate themselves by product or price, the future differentiator in the market will be customer experience and the simplicity in dealing with an efficient energy supplier that has mastered data and develops truly customer centric strategies. Addressing back office industry processes that are constructed around a meter and not the customer is crucial in being able to drive this step change. Suppliers simply can’t afford to ignore the data problem any longer.