Billing and customer care in competitive energy retail markets

Engerati

Billing and customer care solutions need to be chosen wisely by utilities if they are to compete in a highly competitive market.

By Denise Philip
August 30, 2016

Billing and customer care will play a significant role in competitive energy retail markets because energy retailers must now focus on service delivery in order to build a competitive advantage, thereby growing their market share.

In addition to increased market competition, utilities face other tough challenges including such as driving customer satisfaction with real time responses; delivering a premium experience to the commercial sector; enhancing reporting and analytics with real time data both in-house and for their consumers; and enabling EV’s, pre pay and new services with minimal risk.

Billing and customer satisfaction go hand in hand

According to a report by Quindi Research, it would appear that industry experts acknowledge that ‘competitively priced tariffs’ as well as ‘good customer service’ are important factors for winning and retaining customers. The report is based on a survey carried out with numerous retail energy providers operating in unbundled/deregulated markets in Europe, Australia and the US. They were asked for their opinions on market trends and how billing solutions can support their business strategies.

The survey reflects that 80% of respondents agreed that a ‘good’ billing operation has a ‘high impact’ on customer satisfaction, competitiveness and customer loyalty. 95% agreed that accurate billing is a ‘very important’ business benefit of their billing operation with ‘flexible tariff /service creation’ and ‘streamlining of customer processes’ the next most valued benefits. 70% ‘strongly agreed’ that their billing and customer care operation and solutions are key enablers for their business strategy. Over 60% said that competitively priced tariffs and good customer service were big factors. A bigger focus is also being placed on value added services which has probably been brought about by the need to differentiate in a highly competitive market. New entrants are creating the need to innovate, explains Catherine Viola, Quindi Research in an interview with Engerati. She explains: “It is not only about offering a low price anymore. There is also an increasing focus on other differentiators, as well as on demonstrating fairness and transparency in the value proposition to gain customer trust. Suppliers realise that to keep customers, a customer-centric strategy must be in place.”

Maik Neubauer, Managing Director at First Utility GmbH (responsible for Shell PrivatEnergie offering in Germany) told Engerati that billing and customer care is definitely used as a strategic indicator in Germany where the energy retail market has become brutally competitive.

Automating systems for better service

Because competitive prices are eroding margins, energy retailers are trying to find ways to work smarter but still provide a highly efficient customer service. A good starting point is to automate key customer-related processes.

Viola explains: “Automation makes for a smoother process for both the retailer and its customers. For the retailer, this drives down operating costs and helps them cope better with increasing volumes of customers.”

She points to UK firm, First Utility, which has been focusing on automating their key customer processes using LogNet Billing’s MaxBill solution. “First Utility have worked closely with the LogNet Billing team on automating their customer-related processes and have driven down their operating costs very successfully.”

According to Neubauer, Germany is a typical outsource market and as a result needs ‘top notch’ technology to cope in a competitive environment. He says that there are about five to eight business process outsourcing partners in Germany and most of the German utilities, especially the independent ones, have outsourced the billing and customer care operations to compete in the sector.

He says that because the margins in the retail energy area are so small, utilities have to bundle service activities and billing activities together with others. He explains: “Having an own services center is not a real USP anymore. It is more about how you brand and manage the quality of your outsourced services teams to keep the cost of within your acceptable boundaries. It’s a very competitive market and the use of existing and new technology and the customer care and billing needs to be very cost effective and efficient.”

Neubauer explains that his company uses superior customer billing technology to win over and keep customers but points out that the industry can be quite frustrating when customers opt for cheaper prices instead of quality service. He says: “Often the customer will realise too late that the service is quite bad and that the billing process is not working. As a result, they are often bound for at least one year on contract with the discounter before they can switch to a more credible provider again.”

Innovative business strategies

There has been a great deal of disruption in the energy market and one in particular is distributed generation. The economic global downturn, the need for reliability and environmental factors have resulted in this growing trend to self generate at home. This obviously has some negative implications for energy retailers when it comes to a reduced demand from the grid. It will be further aggravated by the adoption of residential energy storage solutions.

Embracing the market gap

But, new entrants are taking advantage of the opportunities that the trend presents. Viola explains that the trick to staying ahead in the market is to question what affect the trend will have on the whole energy retail model in the long term.

Australia’s Mojo Power has done exactly that. The new entrant has stripped out the profit from the energy consumption rate and charges a monthly subscription fee. For that monthly fee, consumers get access to their wholesale rate which is the price at which Mojo Power buys energy from the market. Says James Myatt of Mojo Power: “It’s a fair price that is based on a wholesale rate. There’s no profit margin in it and it’s about 30% lower than the retail rate. Basically, we’re providing an energy services model translated for and are saying to customers: you pay us a monthly fee, we’ll send you a bill, we’ll manage your interface with the market and you can buy energy at that wholesale rate.”

Tempus Energy is another innovative thinker in the energy space. The company uses flexible assets within peoples’ homes or in businesses to help automatically shift their usage to times when tariffs are at their cheapest, for example at night or during times of surplus wind energy generation. The company was also one of three partners which helped Western Power Distribution in the UK to develop the Sunshine Tariff project in Cornwall which aims to lower the cost of energy through the use of customers’ solar panel systems. The aim of the project is to enable ‘additional generation’ customers to connect to the grid on the basis that the local energy demand on the network changes to offset the power generated. If the generation can be absorbed locally then it will have no net effect on network constraints at higher voltage levels.

Other flexible assets include electric vehicles and battery storage.

Says Viola: “By leveraging these flexible assets in their homes, consumers can shift their usage to times when energy is cheaper.”

More than just an energy retailer

Value added services are a priority when it comes to market differentiation. Around 40% of the surveyed respondents felt that it was important for energy retailers to offer these. Connected home services are growing and retailers are scrambling to offer the next best service that will support a more convenient way of living.

Says Viola: “Value-added services can enhance the overall value proposition for consumers, while at the same time helping suppliers avoid the problem of customers switching away in search of the lowest-cost deal by providing a sticker offering that encourages longer-term loyalty.”

One UK supplier, Flow Energy, has launched a value-added service proposition that leverages its new domestic micro-CHP (combined heat and power) boiler technology. The boiler generates low-carbon electricity while it uses gas to heat the home. Flow Energy gives customers the option to pay upfront or in instalments for the boiler. Once payment has been set, customers receive a fixed monthly rebate on their bills over a five-year period which covers the cost of the boiler. It is therefore marketed as paying for itself over a five-year term. From an energy supplier point of view, the contract helps keep customers loyal. Says Viola of the strategy: “They’re offering a competitive tariff but at the same time they are using their value-added service proposition to build a longer term relationship with their customers.”

Mojo Power not only offers great prices, they also consider themselves to be a preferred energy partner by offering a smart meter/data analytics service. The company installs the smart meter for the customer and then provides them with usage assessments to help them manage their consumption better. They also use the data to profile the customer to enhance service delivery especially when it comes to solar and battery recommendations.

Myatt explains: “Our ultimate vision is that Mojo becomes the energy partner of the customer because now we’re aligned with them especially since we have removed ourselves from having to drive profitability through consumption. So we incentivise customers to get the most optimal energy outcome whether that be solar / battery combination or both. Switching appliances out, putting more efficient appliances in. We are also looking into EV’s. So we’ve become an energy services company as opposed to just a pure energy retailer.”

Cast the net wide

Viola recommends that new entrant energy retailers look for a highly flexible and scalable billing and customer information system that can serve their needs from the outset. She adds: “The supply market shows that there are a number of innovative vendors who have flexible billing solutions that are suited to suppliers’ service innovations and business strategies. Many now offer their solutions on a software-as-a-service basis with pricing arrangements that avoid the capital expenditure that’s associated with buying a traditional perpetual software license.”

Some vendors, such as LogNet Billing, are strongly focused on addressing the needs of competitive energy retailers. Says Viola: “The MaxBill solution from LogNet Billng is well-matched to suppliers’ requirements for flexible service creation, converged multi-service bundling, and customer process automation.”

Another innovator is Fluentgrid, which has launched a cloud billing solution for competitive energy retailers in the UK and in the US. As well as offering its own solutions it is also developing a market place for other third party application providers. So for example, if an energy retailer wants a demand response application, it can buy that solution from Fluentgrid’s market place. Viola describes the idea as a type of “Amazon market place” for utility software applications. She adds: “It’s really quite novel and it’s a way particularly for new entrants and the smaller energy retailers to buy additional applications that perhaps they couldn’t otherwise afford.”
While innovativeness plays a major role, it is worth keeping in mind that solutions must cater for local market needs.

A good example of this is Junifer Systems, whose CIS solution streamlines and automates the complex rules and industry processes that are specific to the UK energy market. Energy suppliers can rest assured that the solution will be updated for compliancy when it comes to regulatory changes.

Viola points out that there are several billing vendors that are targeting the Japanese energy retail market, which is opening up to competition. “One example is Hansen Technologies, whose Peaceplus CIS system is now being adapted for the needs of the local market.”

In conclusion, Viola says that energy suppliers should ‘cast the net wide’ when they are choosing a billing and customer care solution. “Rather than just look at the biggest utility billing systems vendors, it’s also good to research the broader landscape including the small and mid-sized vendors and the newer players. Many are doing interesting things and can really help these competitive service providers.”