The challenges

Since the energy supply industry was privatised over ten years ago we have gone through a period where each company has tried to buy out the other – great news for the companies involved but bad news for their customers. But as things started to settle down the companies who survived this battle have realised that they have lost sight of their customers and more importantly they have lost sight of what the customer wants.

With customer satisfaction at an all time low npower was one of the first companies to realise that something had to be done in order to put service back at the top of their agenda.

Gordon says: “The last few years have been very tough for everyone in the industry but with all that behind us we need to face some far more important issues. Wholesale prices are approximately 200% higher than they were two years ago, this, together with the need to meet the Government’s Kyoto targets mean that we need to be in a position to advise our customers on how best to meet their energy needs.

“This is an incredibly fast moving industry and our customers need a completely different service to the one they needed three years ago. This basically means that we need to provide a whole new suite of products and services which can meet the needs of our customers and at the same time we have to re-build their trust in us.”

The ability to change

Just like in the residential sector, companies are very fickle about who they get their energy from and although contracts are for a longer period (typically one year); at the end of the year the changeover rate between energy suppliers is typically quite high. And Gordon accepts that this is largely the fault of the service provider because customers have used the philosophy that if they were going to get bad customer service they may as well opt for the cheapest.

But with the competition high it has become clear that this is not the way forward, Gordon says: “What we are finding now is that the length of our forward contract customers is changing dramatically. By their own choice our customers are opting to move towards longer term contracts in order to help them manage the risk of what is a very volatile market. This means that we are able to work with our customers as a strategic partner and ultimately build a relationship which better matches their needs.

“We recognise that this is a significant change and what we need to do is show our customers that we have it right. The average new deal at the large end of the market is three years. The fact that the market is changing very rapidly means that it will move on significantly in that time which is why it is important for us to not just supply energy – the most important part for us is to understand what our customer wants – and make sure that we can provide it.”

A step change

Bringing about this change has been a lengthy process because customers have typically looked towards a fixed price contract for a short period of time. But with so many people losing out due to the volatile nature of the market this has clearly been a very risky strategy. Flexible Procurement has therefore proved to be something of a godsend for everyone concerned.

It basically means that customers are encouraged to look at a portfolio of products which can be purchased at different times and therefore has the effect of protecting npower customers from the fluctuating prices. And according to Gordon it now gives customers the flexibility to choose the products to suit them: “Flexible Procurement is all about managing the risk of buying energy. By spreading the risk across a number of different products our customers can ensure that they have the right amount of energy when they need it but at the same time it is at a cost which suits their budget.

“Although this may seem a fairly obvious solution it is not something we have been able to offer in the past because we did not have the confidence of our customers. With the work which we have done on the customer care side we are able to demonstrate that we understand the pressures that our customers are under and that we can work with them to find the right solution. The fact that our customers can now have the confidence in us to supply the right product means that it is the right result for everyone.”

Energy management

The launch of the npower Business Energy Index in December 2005 was designed to look at how a cross section of the UK’s industry looked at energy prices and how they were tackling the environmental agenda. What this actually highlighted was that while many people were committed to energy reduction they lacked the time and information to be able to do it properly.

Gordon says: “It has only been the real committed customers that have actually moved forward in this area. The high wholesale prices and the environmental agenda mean that customers know that they want to use less energy and lower their energy bills – the main problem is that they don’t know how to do it.

“We are therefore evolving our product and service suite around this and have introduced a number of solutions which enable our staff to visit a customer and show them ways in which they can make a saving. As well as having the obvious benefit of reducing their energy bills over time this also allows us to learn about our customers and thus ensure that we are providing the right packages and the right advice.”

And finally

It is not an easy industry to be working in at the moment because just when we think we understand what is going on, another piece of legislation comes out which changes everything. Energy management is in fact a very confusing agenda because while there is a whole host of new legislation and grants it is also very easy to get it wrong and fall foul of a hefty punishment. Gordon agrees that while the Government have the very best intentions at heart the reality is that it has lost some of its coherence and that it is up to people like npower to take the complexity out of the regulation: “Our customers are telling us that finding a way through the minefield is a nightmare. They want us to help them through it and we therefore need to work as fast as we can to ensure that we can provide the right solution.

“Unfortunately I can see that the current situation will continue for some time. The supply and demand for gas is a lot tighter than it was and I don’t think that there is a lot of prospect of that changing. Other issues around the world will also mean that prices will continue to remain high. What we need to do is ensure that our customers are kept well informed and that they have the right products to suit their needs. There is no doubt that it is a very unsettling time for everyone but the best thing customers can do is to make sure they have the right long-term partner as their energy supplier and then work closely with them to deliver optimum solutions. It is our job to do the homework so that our customers can benefit from the returns.

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