By Karl Whitelock and Troy Morley
June 28, 2013
(Below is the introduction to this analyst report from Stratecast. This analyst report is a case study that examines how First Utility in the UK is benefiting from LogNet Systems’ Modern Billing strategy and our MaxBill solution. To download this analyst report, please click here.)
Gas and electric service is essential to most of the world, and generally taken by consumers as a given. Most assume that when they open the refrigerator, the food will be cold; or when they turn on the oven, it will get hot enough to cook their meal. When the temperature outside is cold, the furnace will heat the home. When temperatures are hot, air conditioning will work to make the inside of the home comfortable. Most do not contemplate their energy supply, unless when paying their utility bill or when electric service is not available—during a blackout, for example.
In most mature markets around the globe, energy is supplied by state-sanctioned, heavily regulated utilities. There may be a single company that provides gas, another that provides electricity or one company that sometimes provides both. The situation is not unlike the telecommunications industry, where, for most of the last century, there was no choice of provider, nor any competition for fixed line telephony service. The deregulation of telecom in most areas has led to lower prices, increased competition, and drastically increased innovation. In fact, it is hard to imagine the days before there was smartphone technology.
The United Kingdom (UK) energy market is currently one of the most deregulated markets in the world. Starting in the mid-1980s with the privatization of the state-owned provider of gas, British Gas, the UK began the slow change toward a free market for the retail sale of gas and electricity.
By the end of the 1990s, customers could switch between energy retailers. Prior to this point, UK energy providers were fully integrated businesses — they generated the energy and also sold it directly to customers. To allow competition in this market, these companies were required to operationally separate their electrical power plant generation and distribution grid businesses; as well as separating their gas distribution networks (the wholesale energy side), from their sales operations (the retail component).
In 2001, the UK government announced the end of price controls, and declared the deregulation process complete. Since that time, the cost of energy in the UK has been set by the market. While the deregulation of the UK energy industry has advanced further than in most countries, the process of deregulation has not been without issue, nor has the newly deregulated market lived up to all of its potential. This is especially important when compared with similar deregulation initiatives that have occurred within the telecom sector over roughly the same period.
On the plus side, energy pricing within the UK is presently defined by a very competitive marketplace, with over 20 companies retailing energy services (gas and electricity) to both consumers and businesses. This level of competition has provided consumers with the ability to easily switch energy suppliers whenever offers from another retailer deliver a better deal. Innovation by energy suppliers to differentiate and capture customer attention within this crowded market has been relatively slow. Price has been the primary means of service differentiation.
This Stratecast Solution Strategies report looks at how one UK energy company—First Utility—has learned from its beginnings in the telecom industry that differentiation through advanced service offerings, focused on an improved customer experience, is not only feasible, but practical and acceptable to its targeted customers. This differentiation will eventually include the bundling of communications services with energy services and other “for the home” capabilities. The report also explains how one business solution supplier—LogNet Systems—plays a key role in helping First Utility move toward its long-term objective of becoming an “everything for the household” business, via what LogNet Systems calls its “Modern Billing” approach.
To download this analyst report, please click here.