What impact has a move to remote working had on domestic energy bills? How does this impact utility business and what does this mean for digitalisation and the adoption of technology?
Energy use around the world has dropped by up to 20% in some countries, and reports have compared weekday energy patterns of consumption to “a quiet Sunday.” Even as economic recovery is starting to be seen around the world, in most countries, demand is still 10% below pre lockdown levels. Domestic consumption, on the other hand, has soared by up to 40% as more people work from home. The result has been utility companies under a severe financial strain, with that strain being shared by consumers who are seeing an increase in their bills – at a time when many are under significant financial pressure.
In the United States, Florida’s Public Service Commission has given the go-ahead for power companies to recover revenue lost due to delinquent consumers, by increasing charges to paying customers. The regulator further agreed that other ‘pandemic-related expenses’ could also be charged to customers. This move, says the Office of Public Counsel, is unnecessary – saying the investor-owned power utilities in Florida were ‘earning as much of a return on investment as they did during the pandemic.’
Safety and bad debt losses for Gulf Power, for instance, are estimated as $2.1 million in bad debt for April, plus $4 million for the year in safety-related costs. Duke Energy says it is short $18 million in revenue for the period 1 April – 1 June compared to last year and is considering a number of options before filing for cost recovery related to COVID-19.
Investor-owned utilities in Florida are allowed to earn money back on capital investments (in the case of Duke Energy, this amount to a 10.75% return in May). If returns dip below a percentage range determined by the commission – due to increase costs for instance – they can request an increase on customer bills to get within range again.
On the other side of the Atlantic, the UK energy watchdog, Ofgem, has reduced the energy price cap to a record low. It is anticipated the move will result in energy bills being cut by between £84 and £94 annually for over 15 million households. From October, the cap on dual fuel energy tariffs will average £1,042 annually, compared to £1,126 previously.
Energy markets in the UK are at their lowest level in 20 years but as economic activity starts to regain momentum, Ofgem has warned that the price cap could be reviewed upward for the six month period from April 2021. The cap is re-examined on a six monthly basis to ensure that consumers on a standard variable tariff get the best deal.
Some of the bigger utilities in the market have said that the price cap has had a detrimental impact, and have cut jobs as a result, blaming the price cap for their current financial strain. The biggest challenge however, is balancing the realities that consumers don’t want to pay more, but they want to work with a utility that is competitively priced with greener energy options available.
How can technology support this shift to more cost effective operations and greener options for consumers in a time of social distancing?
If there is one thing that has come out of the COVID-19 led lockdowns – it has been the ability of utilities to shift to a remote management option with ease. This boost to digitalisation has had positive effects on utilities such as ENEL, E.ON and Iberdrola as they increased the speed of their adoption of new technology. Those that had started on their digitalisation journey ahead of the lockdowns have been the most resilient. ENEL plans to add an additional 2.5 billion euros between 2020-2022 to the 4.5 billion euros it has already invested in digitalisation in the last three years. The big focus for ENEL will be the ‘platformisation’ of its business.
German utility E.ON has taken the concept of remote working to a new level, developing an application which can be used to help technicians and consumers video conference and lets technicians assist consumers fix their smart meter problems themselves.
What has your utility experience been during the COVID-19 lockdown? Have you seen an increase in the innovation and digitalisation efforts of your business? Has this allowed you to pursue projects with renewed urgency? Has your focus shifted from physical infrastructure investment to more digitally based projects? Has your ability to invest in innovation been impacted by a reduction in revenue? How do you plan to recover lost revenue due to COVID-19 in the months that follow?
Until next time,
P.s. Speaking of digitalisation, I can recommend giving our latest podcast a listen. I really enjoyed speaking to Mike Ballard, Vice President Industry Strategy at Oracle Utilities, about financial sustainability and the importance of digitalisation for utilities.