the heat is on for the “big six”
FACE UP OR FALL BEHIND!
Not since the mid-1990s when the energy market in the UK was de-regulated has the utility industry faced so much change pressure. Forgive the pun, but the heat is really on, and the “big six” energy suppliers will all be feeling the pinch somewhere. Here, we look at some of the most significant challenges facing the “big six” along with some intelligent interventions that can help tackle the obstacles in their way of success.
The “big six” is a term used to describe the six largest UK energy companies operating. They are made up of British Gas, EDF Energy, E.ON UK, npower, Scottish Power and SSE, and currently supply close to 95% of British households with gas and electricity.
1. COMPLIANCE AND REGULATION
The “big six” are under the microscope like never before.
As wholesale energy prices reached their lowest point for years during 2016, they are under increased pressure by government regulator Ofgem, backed up b a hungry media machine to pass on these savings to their customers.
Not just that. There is a long list of regulatory and compliance changes being imposed by Ofgem. For example, transparent billing is now mandatory so that consumers can better understand and therefore make more informed buying decisions. Rather than months to change energy suppliers, the industry is under pressure to replicate the financial services and telecoms industries and afford consumers the option to switch in a matter of days. Large energy consumers, typically businesses will have the capability of half hour measurement. These are just a few examples of the crowded regulatory change agenda facing the “big six”.
There is little in the way of public and media sympathy for the “big six”, as record profits have been announced in recent years. It now seems like payback time! Neither are Ofgem slow in holding the “big six” to account, significant fines have already been levied when they have failed to meet their obligations.
Fines in excess of £50m have been imposed by Ofgem to leading energy companies over the last three years.
2. THINKING SMART
SMART meters in every GB household and business by 2020
The governments Department of Energy and Climate Control (DECC) have issues a mandate that 30 million GB households and small businesses will have SMART meters fitted by 2020, although it is likely that this will be later given delays already experienced. The aim is to provide information to the consumers at their fingertips so that they are able to make informed decisions around consumption and buying, thus saving them money and reducing emissions. This is a mammoth technology, logistical and business change challenge. The “big six” have not faced a change programme of this magnitude since deregulation in the 1990s.
It gets more complex than this! The industry players have to integrate their systems and technology with DECC appointed service providers so that SMART metering is implemented in a standard manner across GB, thus providing full interoperability. This will allow consumers to easily switch between energy suppliers. Integration is also required with the meter manufacturers, some of whom are embarking on their change journey from “dumb meters” to digitally connected intelligent devices. Information will be provided into the home via DECC appointed Date Communications Company service (DCC), individuals will also have access to usage and tariff information via smart phones and tablets. Robust security standards therefore need to be complied with.
SMART will require the replacement of 53 million gas and electricity meters in approximately 30 million residential and business properties by 2020
Smart meters are the next generations of gas and electricity meters and they offer a range of intelligent functions, This includes telling you how much energy you are using through a display in your home. They can also communicate directly with your energy supplier which means that no one will need to come and read your meter.
All the leading players have their SMART Metering programmes underway now, some choosing to press ahead with technical trials and early roll-out, others waiting a little longer as the playing field becomes clearer.