Building consumer confidence-the most elusive concept in the energy industry

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Consumer confidence in the energy industry is unlike utilities such as TV, broadband, or mobile phones. Consumers do not trust their energy utility. Educating the consumers about what they are paying for is the first step to building their trust, believes Suket Singhal, the Group CEO of Secure.

There’s a huge difference between energy as a service and other consumer services. It sits somewhere between ‘water’ as a human right and mobile phones, TV and broadband which are considered ‘nice to have.’

The energy industry landscape is far more complicated than other utilities, particularly due to the high magnitude of political influence in the electricity and gas industries. Electricity and gas are critical, and politicians often win or lose elections on the back of outcomes in energy. Given the number of drivers and the political interventions that exist, it’s critical for utilities to build consumer confidence and trust.

 

Lack of trust, consumer confidence

Consumers trust their mobile phone, TV, or broadband service provider because they provide them with regular consumption information, accurate billing, flexible payment options and the freedom to change. It is critical to identify and address the pain points which contribute to this lack of trust for energy utilities. The single biggest reason consumers don’t trust utilities is that most of them don’t understand what they are paying for. At best, they get a monthly bill; more often they get a bill every two or three months. It is very difficult for a consumer to remember what happened over that billing period if they receive bills after such a long time. The confusion gets bigger if they receive an estimated bill. For business owners, especially small and medium enterprises, the irregular nature of the bills can severely impact their cash flow. Providing clear and unambiguous information that will help consumers better understand what they are paying for is the first step to improving consumer confidence.

Getting clarity on the service delivered, what they are being charged for that service, and how much they are going to pay is very important to consumers.

 

Consumers are willing to pay

 Most consumers are ready to pay for a good quality service. If consumers start getting an excellent service their trust in the utility increases manyfold as does their willingness to pay for the service.

There are a lot of consumers who are willing to pay, but cash flow can often be a real challenge, especially for those who are paid weekly or infrequently. For these consumers, the day the bill arrives could be significant to their family. Regular consumption information could help shape consumer usage and allow them to budget the cash they have available. In the UK, energy costs account for an average of 4-6% of total income (electricity, gas and other fuels combined). If we give consumers real-time information about the specifics of their consumption, they can identify ways to reduce it. Not all consumers are financially constrained, but everyone needs this information to spend their money more prudently and use energy more wisely. Role of payment options.

 One of the major challenges facing utilities across the globe is how they set up and improve their billing engines. It has been difficult for utilities to provide consumers with an accurate meter reading on a specific date and time, and therefore it’s not possible to determine the daily usage of consumers. However, if you can provide ‘real-time’ consumption data in local currency, and display this information at a readily visible location, consumers can get a clear idea of how much they have spent. More than just a daily reminder, it provides a sense of security to consumers that the bill from the utility will be in line with the figures displayed on the meter. This makes them feel “yes I know I should be paying this amount, as it reflects on my meter data”. Ensure you’ve got the account mapping lined up, and then start building trust.

The cost of energy is not static from day to day, because it’s continually flowing. Therefore, consumers are not able to visualise the per unit cost of energy. If you are able to provide them this information on the day itself, they are more likely to remember on what or why they spent a certain amount on a specific day. But if they get a huge bill at the end of the month – worse, in three months – and they have no idea as to how that amount was reached in a granular way, it cracks their foundation of trust.

“Every meter could be a billing engine in its own right and as long as you have got good technology and good administrative process in place, this could be fairly easily done”.

This information coupled with a mechanism whereby consumers don’t have to pay once a month or as per the billing cycle – they have liberty to pay when they want to or when they have extra money – could transform their daily experience with energy!

Alternatively, an energy company could make an agreement whereby they give an ‘overdraft’ of, say, £100 to the consumer. They can leave it up to the consumer to figure out how they want to use that overdraft for the energy used. The consumer could choose to pay £25 a week for four weeks or they could choose to pay the full amount in one month. Transactions could be undertaken via SMS, an online platform, cash over the counter, or in numerous other ways that are convenient to consumers.

 

Success of metering as a payment manager

“Northern Ireland Electricity took our technology and used it as a debit accounting product; a prepayment meter,” says Singhal.

“They have further developed pricing and payment options around it and today, nearly 43% of their customers are using this product. They marketed it as “I love keypad”, and the brand association has been fantastic. We had a similar case with a retailer in England many years ago. We provided them a solution for their small / medium enterprise segment which worked as a budget controller. They used it for pubs and chip shop type accounts – which often created credit issues.”

These SMEs were offered an ‘overdraft’ limit which provided a real time warning as they approached it. When the consumer reached a specified percentage of the overdraft, they received a phone call from the agent to discuss their circumstances and whether a credit extension was necessary and possible. It was a very constructive conversation and they saved many small businesses from going under because they didn’t have to force them into ‘doubtful solvency’ or insolvency.

Secure have been doing a lot of work around the world with utility consumers on just this concept, and it’s been hugely successful. By providing meters that inform consumers about every single penny they spend on a daily basis, in their own currency, and offering them flexible payment options, utilities can transform the dynamics of the energy industry.

“We are at the cusp of a transformation in the energy sector and the whole industry will suffer if we don’t carry consumers with us! The first step in this trust building exercise is the need to ensure they understand what they are paying for and that it is a fair price,” Singhal concludes.

Utilities can be progressive and work with us to develop products around the technology. They can build some fabulous services, increasing market penetration and reducing customer churn.

 

This article was originally published in Smart Energy International 1-2019