The Topic: TPIs
THIRD PARTY
INTERMEDIARIES
THE
TOPIC
Customers trust
TPIs over suppliers,
but for how long?
I
t seems new iron has been plunged into
the furnace – or should that be pyre? – of
energy sector change: third party intermediaries (TPIs). Over recent years,
these middlemen – brokers, energy
consultants, efficiency advisers, switching
sites and aggregators, etc – have become an
increasingly active and influential layer in
both the domestic and non-domestic markets, thriving and proliferating as trust in
suppliers declines.
Mediating between suppliers and their
customers, TPIs provide impartial guidance
and ensure users get the best deal available for their needs (at least theoretically),
whether they are domestic, small business,
commercial or industrial users.
TPIs have also matured in the nondomestic market to offer “niche” guidance
to businesses confused about how to negotiate a multitude of confusing energy regulations and schemes. Customers – especially
smaller, resource-stretched businesses that
have seen energy take up an increasingly
large proportion of their cost base – are
anxious to take advantage of any possible
exemptions, benefits or deals on offer from
government and suppliers while also ensuring compliance. TPIs are doing a roaring
trade by offering them a helping hand.
Furthermore, standing at a distance from
the embattled community of energy suppliers and network operators, TPIs in both the
domestic and non-domestic markets have
largely avoided the torrent of toxic political
and media abuse poured on the sector over
the past 18 months or so. Surveys show that,
Breakdown of annual TPI revenue
Industrial and
commercial 56%
Source: Cornwall Energy
6 | 3RD - 9TH JULY 2015 | UTILITY WEEK
The Topic: TPIs
Household 23%
SME 21%
while suppliers in particular are struggling
to dredge up even moderate levels of customer trust, TPIs are enjoying satisfaction
and reliability ratings that are high by any
standards.
A 2013 RS Consulting report recorded
94 per cent of domestic customers rating
price comparison site as reliable and a BMG
Research report compiled for Ofgem last
month found that 74 per cent of micro and
small businesses are satisfied with the service they receive from brokers.
However, more recently it has become
obvious that the moral high ground TPIs are
perceived by many to occupy is distinctly
vulnerable.
Questions have been raised over the
transparency of TPI fees and their operating methods. Commission rates and
cold calling practices have sparked criticism from consumer and business groups,
from Citizens Advice to the Federation of
Small Businesses, putting Ofgem under pressure to intervene and prompting the Competition and Markets Authority to include TPIs
in the first wave of its inquiry in the energy
market.
As the water sector prepares for market opening and speculation rises about
the opportunity for TPIs to function in that
space too, the repercussions of new licensing
regimes and codes of practice could be far
reaching.
The following pages bring updates on
steps to improve the regulation of TPIs and
insight into other trends which may alter
their form and function in the market. JG
TPIs are now also the main route to market for new
customers in the household market
Supplier
Supplier inbound 37%
outbound 18%
Price comparison
websites (online and
telephone) 42%
Collective switching 3%
WHAT DO UTILITY
TPIs DO?
 In the domestic market, we
mostly understand TPIs as price
comparison sites, through which
around 40 per cent of domestic
supply switches are made, according to a June 2014 report compiled
by Ipsus Mori for Ofgem – up from
20 per cent in 2011.
 That said, there are in fact a
number of nuanced TPI services
on offer for domestic customers
looking to switch energy provider,
including collective switching,
providers of mobile apps and alert
services for cheaper tariffs.
 Energy efficiency advisory firms
might also be described as TPIs
and, in the future, experts anticipate that there will be a dynamic
market for domestic demand
aggregation services in order
to facilitate more fluid demand
response mechanisms across the
electricity grid.
 In the B2B energy market, the
role of TPIs is more mature than in
the domestic space as many businesses have long since looked to
external experts for advice on the
best energy purchasing strategy
and the best deals available (p10).
 In the non-domestic market,
TPIs manage around 85 per cent of
large industrial contracts and their
activity in the small and mediumsized business space is increasing steadily as energy becomes a
larger component of companies’
overheads.
 As the water sector approaches
market opening for non-domestic
customers, speculation has risen
about the emergence of TPIs in
this market too, where they could
provide valuable advisory and
service “bundling” support (see
column, right).
 An increasingly complex regulatory and policy landscape has
more recently caused a proliferation of “niche” TPI companies that
pride themselves as much on their
abilitiy to support compliance –
and associated benefits realisation
– as on their ability to find financial
economies (p12)
“Current offerings in the market seem to be
more suited to large businesses that are better
able to negotiate contracts that suit their
needs, and are more likely to be approached
by a credible broker, than the little guys.”
• Andrew Hallett, policy manager, Citizens Advice
WATER SERVICES COULD BE ADDED TO THE MIX
The opening of the non-household water market to competition in April 2017 will bring with it
opportunities for TPIs.
They are likely to be more sophisticated
than typical brokers and could offer a multitude
of services.
Open Water (the body charged by the
government with overseeing the introduction of
competition) suggests that water comparison
sites could spring up, with the likes of Uswitch
adding to its price comparison portfolio. This would
allow businesses to
assess price, much as
energy customers do
already.
It is also likely
that the market for
water consultancy
will become more
active, helping
businesses to
negotiate better
water contracts,
though as CMR
consultancy a
subsidiary of
Ener-G Group,
warns readers
on its website
“choose your
water consultancy carefully; it
is ­unlikely that third
party intermediaries
will be regulated when
the market first opens”.
Open Water says it expects
more “tailored advisory services” to appear
with market opening, particularly targeting
water efficiency or probably a combination of
energy and water efficiency – costs which are
intrinsically linked.
It is likely these services will be delivered
increasingly on a shared benefits basis, Open
Water has speculated, whereby TPIs would
offer their services at a heavily discounted rate,
or even free, on the understanding that they will
receive a cut, usually ongoing, of the savings
generated.
Such shared benefits packages are already
common between energy and water-intensive
users, such as food manufacturers, and
technology providers. They remove the need
to make an investment case while offering the
perks of an ongoing revenue stream. Indeed,
some TPIs predicate their whole income on a
share of the saving achieved.
Other companies, such as SSE Water,
may look to take the bundling route. SSE has
joined trade association Water UK ahead of
market opening, and describes the move into
water as “a natural step” in growing the business. With electricity, gas, and broadband all
offered alongside water by SSE, there is the
potential to wrap them together in multi-utility
packages.
The Peel Group is another company that
is already well placed to offer wider, bundled
water services after market opening. The
­diversified group currently supplies water to
Media City in Manchester as well as offering
a range of other abstraction and discharge
services deriving from its large portfolio of
canals, rivers and docks in Manchester. Its utilities unit also already supports energy services
for homes and businesses sited on Peel Group
developments.
Other companies will be similarly well
positioned. As April 2017 approaches, they will
no doubt be weighing up the size of the prize to
be gained. MB
“It would be helpful if third party
intermediaries are also part of the
solution [to energy industry challenges
around consumer trust] and, if needed,
that they are subject to the same kind of
scrutiny that we are, with the same kind
of constructive regulation.”
• Vincent de Rivaz, chief executive, EDF
UTILITY WEEK | 3RD - 9TH JULY 2015 | 7
The Topic: TPIs
THIRD PARTY
INTERMEDIARIES
THE
TOPIC
The Topic: TPIs
Everything comes
at a price
hand tactics of other switching
sites, has made calls for commissions to be made public, saying:
“Commissions are a cost that
end up on our bills. If comparison sites have been colluding to
fix these commissions at a high
level, that is a scandal. ComLucinda Dann explores price comparison websites, the essential
parison sites should now publish
intermediaries in the domestic energy market.
their commissions as a matter of
urgency, but many consumers
will never trust them again.”
rice comparison sites comparison players. Instead SWITCHING SITE
Unsurprisingly, not all switchare key to a dynamic of showing the full gamut of
ing
site chief executives have
FIGURES
domestic energy mar- deals available, these sites only
backed this call and, in a writket. They have become showed tariffs on which they
ten submission to the committee
integral players in the would receive commission. Cushearing, Ofgem also outlined its
constant push to increase switch- tomers had to manually opt-in to
reasons for not making commising and important facilitators for a whole market view to see the
sions public. The regulator said
commission earned
customers seeking cheaper tariffs full range of tariffs.
that doing so would risk “conon switches by
– and therefore of the wider polIn March Ofgem showed it
fusing customers”, “lead them
switching sites per
icy ambition to drive down bills.
can flex some muscle in the
to make poor decisions to lower
single fuel customer
However, in recent months domestic market, if not on the
the amount of commission
switching sites have come under business side, by publishing
earned”, and “lead to tacit coorfire for failures in transparency a revised code of conduct for
dination among suppliers and/
and, thereby, misrepresenting energy price comparison webor sites.”
of the domestic
their helpfulness to customers.
sites. Enforced from the 1 April,
That said, in February, before
market uses a price
Despite the largest switch- accredited sites must now show
the
code was published, Ofgem
comparison site to
ing sites telling the Energy and all tariffs available as standlaunched an investigation into
switch
Climate Change Select Com- ard and explain more clearly
energy price comparison sites
mittee in February that hiding that commission is earned on
over whether “two or more” have
the cheapest tariff available to switches made through the site.
been sharing information on the
customers was wrong, evidence
Consumer collective the Big
commission rate they are chargpeople used
found that this was in fact com- Deal, which published the origiing to energy suppliers, which
MoneySupermarket
mon practice for many price nal research revealing the undersomewhat blows a hole in their
to compare energy
last argument against the publideals last year
cation of commissions.
The committee mused over
whether the time is right to introCompare the Market
duce a not-for-profit switching
people switched
Money Supermarket
site to take commissions comsupplier using
Go Compare
pletely out of the equation, like
MoneySupermarket
Confused.com
the Australian government has
Uswitch
chosen to do. Whether it chooses
to recommend this action or
not it seems there is a growing
feeling that services designed
to make the notoriously
An update to the code confusing energy market
is expected over the clearer, are themselves getsummer. This will ting into increasingly murky
include expanding its waters. Calls for greater
scope to white label transparency, scrutiny and
sites
regulation are not unlikely.
P
£22-£30
40%
3.5m
THE BIG FIVE
320,000
SMART METERS WILL ENABLE THE EVOLUTION OF INTELLIGENT SWITCHING SITES
The wealth of data that the imminent
smart meter rollout will provide should
lead to the evolution of intelligent switching
sites.
Such sites will theoretically be able to
learn what matters to individual customers
when picking an energy deal and automatically prompt them to switch to deals that
offer the best balance of their preferences.
They may even offer a service for continu-
8 | 3RD - 9TH JULY 2015 | UTILITY WEEK
ous switching, taking all of the hassle and
irritation out of the customer’s hands once
their preferences are approved.
Smart energy consultant Susan Furnell
says: “People have always said that this
is a thing that could happen in the UK
and that switching times were a barrier,
but now they have come down to 17 days.
When you have smart meter data and the
ability to get the user to authorise that
data, it will be easier to provide this kind of
service.”
Furnell says this kind of service could
evolve before the meter rollout by adding
sensors to dumb meters. “There will be
disintermediation by all kinds of players
once the data is there. Other people will be
able to grab that relationship, and what’s
in it for them is some kind of fee to keep
moving the customer.” LD
Opinion: Switching
sites: the friend of
the independent
energy provider
“If the government wants more
people to switch energy supplier
then it has to ensure that energy
price comparison services are
transparent and trusted.”
Tim Yeo, former chair, Energy and Climate Change
•
Committee
DEMAND-SIDE TPIs
TPIs could prove an
ideal interface between
DNOs, s­ uppliers and
National Grid.
In the domestic market, consumption
data made available by smart meters,
or alternatively by the evolution of the
internet of things, will provide a key
opportunity to data and analytics companies within the energy sector within
five years.
Dr Chris Brauer, director of Innovation at Goldsmiths, University of
London, believes major suppliers will
be “looking to partner with organisations to create a consolidated capability inside of these areas to be able
to compete”. He also expects to see
more of the big players in the data and
analytics world move into the energy
demand aggregation market. Google
has already signalled its intent in its
acquisition of Nest, a smart thermostat
that could provide a gateway to future
service provision.
The Energy Saving Trust’s director of operations, Duncan McCombie,
says: “To see this kind of market, you
have to move away from ownership
of a customer to more access to assets
and services. Google bought Nest
because it saw a future opportunity,
and Eon is doing exactly the same by
acquiring a part stake in Enervee.”
Thomas O’Reilly, head of strategic
planning at Siemens, believes that
distribution network operators – or
spin-off organisations – could make
a play for ownership of the consumer
demand-side aggregation marketplace, motivated by the desire to manage substation capacity more closely.
“From an aggregator point of view,
that service can come from any number of different sources, such as traditional demand response through
switching things off, or non-traditional
demand response such as switching
distributed generation assets on,” says
O’Reilly. This generation may already
exist or may be procured as part of a
managed service.
The role of the aggregator, as
O’Reilly sees it, will be to provide scalable demand response that can cope
with hundreds of thousands of assets
in a specific geographical location.
Aggregators will also need to manage
conflicts between distribution network
operators and National Grid.
Smart energy technology expert
John Scott, director of Chiltern Power,
adds that the arrival of electrified
transport, will throw newly “attractive
loads” open for TPI management. LD
HOUSEHOLD ENERGY TPI INDEX Q115
Cornwall
Company
ServicesFinances Employee Switches Cornwall
Index rank
Index
Index
Index
Index
Index Q115
1
MoneySuperMarket 55 5
4 19
2
Uswitch
53 4
5 17
3=
comparethemarket 35 4
4 16
3=
Gocompare
45 4
3 16
4=
Confused
44 4
3 15
4=
Which? Switch
3
4
5
3
15
5
Moneysavingexpert 32 4
4 13
6=
Energylinx
41 4
3 12
6=
UKPower/Makeitcheaper5 1
3
3 12
6=
Simplyswitch
42 4
2 12
Average Index values for all 33 TPIs
2.3
1.9
3.3
2.0
9.5
“Switching sites present
people with quick and
easy access to the best
energy deals on the market.
Price comparison sites are
important for First Utility
because they account for
over 40 per cent of industry
switches, and they ensure
people are aware of our
better pricing and how much
they can save as a result.
“This in turn results
in lower prices and more
competition for the benefit
of all consumers. Research
shows that 70 per cent of big
six customers are currently
on a standard variable tariff
and are therefore overpaying
by £3.4 billion.
“We believe that switching
sites are well placed to
engage with consumers and
empower them to make
good choices about their
energy supplier. The key is to
ensure they are transparent,
impartial and trusted.”
Ed Kamm, chief customer officer,
First Utility
Cornwall Energy has compiled indices for each of the four categories, Services, Finances, Employee numbers, and Switches, and
rated each company from 1 to 5, where 1 is the lowest and 5 is the highest. The total score is out of 20.
Source: Cornwall Energy
UTILITY WEEK | 3RD - 9TH JULY 2015 | 9
The Topic: TPIs
THIRD PARTY
INTERMEDIARIES
THE
TOPIC
The Topic: TPIs
Market waits for
mandatory code
Energy companies are still waiting for Ofgem to pronounce on a
mandatory code of conduct for non-domestic TPIs.
I
n March the delivery of a
long-promised mandatory
code of conduct for nondomestic TPIs was delayed
until after the results of the
ongoing Competition and Markets Authority investigation of
the energy market. Already two
years in production, the code
should bring transparency to
an opaque market, where just a
small section of players is willing to declare what they earn in
commission.
The code, if enforced, will
require TPIs to declare their com-
mission earnings and require
energy suppliers to deal only
with licensed TPIs. Today, it is
by no means standard for suppliers to place any specific requirements on TPIs serving their
mutual customers to behave in
a certain way. Some suppliers,
such as EDF Energy, have their
own TPI partner auditing structures, but others have none.
As TPIs handle the majority
of contracts in the non-domestic
market – up to 85 per cent of
large industrial contracts – the
introduction of a universal and
mandatory code of conduct
would bring about big changes
in the way business is conducted
in the industrial and commercial
energy market.
There is already a voluntary code of practice for TPIs,
but Ofgem admitted in a letter
announcing the delay of the
mandatory code that it knows
that only a few follow these
rules. Jo Butlin, chief executive
of commercial energy solutions
provider Utylix, says that “half of
the TPI world is massively frustrated that it has been shelved,
and half are hugely relieved”.
It is the relieved ones, she
says, who are damaging trust
within the TPI market by operating in a world of “smoke and
mirrors.”
Butlin believes Ofgem’s delay
is a detriment to non-domestic
customers and that “a lot of [TPI]
businesses are making a lot of
money by not being transparent”. Ofgem justifies its decision
MICRO AND SMALL BUSINESS EXPERIENCE OF TPIs
Micro and small businesses might be assumed
to be easy prey for
unscrupulous TPIs, but
despite advocacy groups
such as the Federation
of Small Businesses and
Citizens Advice complaining
of a “protection gap” that
exposes small business
energy customers, a recent
survey conducted for
Main source consulted when choosing current gas or electricity
contract of tariff, by organisation size – prompted, multiple response
(all respondents)
All businesses (1,502)
0 employees (231)
1-9 employees (820)
10-49 employees (451)
Ofgem by BMG Research
of more than 1,500 such
businesses showed high
satisfaction rates overall.
However, the detail of
responses shows there is
much to be desired when it
comes to transparency of
purpose, fees and the way
in which customer contacts
are managed by TPIs in the
small business space.
A broker
37%
A price comparison website
or telephone service
Perceived conduct of brokers in approaches to business (where approached
by a broker)
Don’t know
No
Yes
Identified themselves clearly as an energy
13% 37%
broker
They provided accurate information about
26%
34%
the services they offered
Their tone was professional 14% 25%
They were upfront about whether there was
22%
a cost for your business for their services
10 | 3RD - 9TH JULY 2015 | UTILITY WEEK
22%
20%
23%
24%
Extent to which businesses are satisfied with the service provided by
the price comparison website to telephone service
Very satisfied
31%
Quite satisfied
42%
11%
Neither
Quite dissatisfied
14%
6%
20%
23%
41%
4%
1%
5%
44%
31%
Other suppliers
15%
13%
33%
40%
61%
55%
12%
10%
14%
11%
Current supplier only
50%
Number of times business have been approached by a broker in the past 12
months (all respondents)
None
1-10 times
11-20 times
21-30 times
31-40 times
41-50 times
>50 times (too many to count)
Don’t know
26%
22%
25%
Very dissatisfied
Don’t know
6%
3%
6%
by saying the delay “reduces regulatory uncertainty by clarifying
external conditions” and that it
doesn’t want to “overburden” the
industry in the midst of what has
been billed as a seminal CMA
investigation.
Peter Bennell, the chief
executive of the UK’s fifth largest business electricity supplier,
Haven Power, told a room full
of TPIs at its annual conference
that he thought Ofgem was using
the CMA as an excuse.
“I don’t think Ofgem knows
what to do and I think they have
parked it with the CMA who say
they will have a little look at it.
But I think it will come back. I’m
afraid there are too many disreputable TPIs who bring the rest
into disrepute.”
Butlin agrees, saying “that felt
like an excuse rather than a real
answer”. While she acknowledges part of the challenge with
the non-domestic market is that
the term TPI “covers a broad
church”, she doesn’t think introducing transparency should be
difficult, or take so long.
A different approach that
would effect a lot of change in
the industry would be if suppliers took it upon themselves
to put commission on bills. But
while suppliers seem in favour of
more transparency around TPIs
and commission, no-one wants
to be the first to move. “It’s a
competitive market,” Butlin
says, “you can understand [the
reluctance]. It would be better if
Ofgem just imposed it”.
The big question left on the
table is what will the outcome
of the CMA be next week? Butlin
does not think it will be anything
very radical. However, it will
open the door for Ofgem to prove
whether or not is “has teeth”.
Cornwall Energy director Robert Buckley does not believe the
end product will be a “code with
an Ofgem badge on the front of
it”. He suggests instead a move
towards a framework which is
left to others to manage.
Whatever happens, the code
will not be allowed to fade quietly away under the cover of the
CMA results. As Butlin says, a
“lot of the customers get told
that the TPIs are doing it for free
and they are absolutely not”,
and until that changes, every­
body will be tarred with the
same brush. LD
Viewpoint:
The rule of Three Letter
Acronyms
Do TPIs simplify a complex
market or exploit customer
ignorance?
T
hree letter acronyms (TLAs) rarely
represent the most accessible of
customer experiences and often
simply guarantee that customer confusion is
imminent.
For example, everyone has a DNO and is
charged for consuming KWh’s on the basis
of recovering charges against the Rav of the
Rab. Yet I doubt that anybody outside the
utility industry has the foggiest notion what
any of these things mean.
Similarly, middlemen or third party intermediaries (TPIs) are intrinsically prone to
creating muddled understanding of industry
value chains for end users.
Part of the challenge in defining what
the value of utility TPIs should be – and in
ensuring they actually generate this value
– lies in the multiplicity of their role and
in this, the financial sector’s independent
financial advisers (IFAs) could provide a
useful point of reference:
• What do they do and what value do they
create?
In both cases, they provide a range of
services some of which are based on the
provision of market-independent technical advice (i.e. energy efficiency or hedging
strategies) and some of which are based on
market comparisons and/or product advice
(this may include access to deals that are
not publically available).
In the case of the utility TPI, there is also
an aggregation and negotiation service for
which the IFA has no direct equivalent. In
both cases, a failure to clearly differentiate
between the independent and non-independent roles creates the potential for abuse
of trust.
• How do they make money and do they
make too much?
In both cases there are a range of business
models and revenue models at play, but
as with IFAs, utility TPIs often make much
of their money from a small margin that is
applied to the customer’s fees. Given the
implied independence issue above, it is
essential that the existence and nature of
these charges are transparent to the customer. Knowing whether the intermediary is
being incentivised by any potential suppliers, and how, is fundamental.
The Competition and Markets Authority
highlights the variance in margins between
domestic at 3.3 per cent, big businesses
and 2.1 per cent and SMEs at 8.6 per cent as
grounds for concern that SME’s may be suffering from a lack of competition. This may
just reflect the different amounts of value
being added for each segment.
Retail Market Reform (RMR – another
TLA) aims to make the retail market simpler,
clearer and fairer for consumers while
intermediaries would claim to save customers money. These two aims are not mutually
exclusive and are both worth having. Utilyx
reckons that as much as 0.5 per cent to 1
per cent of the average energy bill could be
made up of “hidden charges” costing UK
businesses as much as £100 million per
year.
But there is no reason for these costs to
be hidden, and if they are offset by a bigger
underlying saving then they are entirely
justified. This model works well in other
complex markets such as life insurance
and mortgages, which share many of the
same features in how they are sold and in
the potential for customers to pay vastly
different amounts for essentially the same
service.
While I would be the last to hold up the
financial sector as a model for serving customer needs, the comparison is informative.
One simple principle can ensure that customers are protected against the potential
pitfalls: transparency.
This means that:
1. Intermediaries must declare their independence or otherwise.
2. Intermediaries must state how and how
much they get paid and by whom.
The financial sector is a particularly
bad offender in the TLA world with its
APRs, PPIs and IFAs. But in a rare act of
unintended philanthropy, the last of these
might just provide a very helpful analogy for
something that the utility world is unduly
struggling to grapple with.
Toby Ashong, director and head of
infrastructure, Boxwood, recently
acquired by KPMG
UTILITY WEEK | 3RD - 9TH JULY 2015 | 11
The Topic: TPIs
THIRD PARTY
INTERMEDIARIES
THE
TOPIC
Opinion:
We need
transparency
in broker fees
“Postponing [the
introduction of a
mandatory code of
practice] at all is a
terrible idea. We have
a situation at the
moment in the UK
where businesses
simply don’t know
what they’re paying
for their energy. By
using brokers they are
putting themselves at
risk of much higher
fees.
“I personally believe
that Ofgem has a
responsibility to make
the procurement
process through a
broker as efficient
and as transparent
as possible. My view
is that, if this has
been postponed, it
suggests Ofgem is
possibly more swayed
by the big brokers and
consultancies than it
would like to admit.
“This should have been
something that was in
place years ago.”
Charlie Lass, chief executive,
Open Energy Market
“[The comparison sector] is a
valuable free service that helps
consumers to save hundreds of
millions a year”
• Steve Weller, chief executive, Uswitch
12 | 3RD - 9TH JULY 2015 | UTILITY WEEK
GETTING IT TOGETHER
The relationship between
TPIs and suppliers also
needs work.
Improving transparency lies at the heart of
the challenge for TPIs looking to move forward in the energy sector. But straight talking and honesty are not only needed between
the TPI and its customers – supplier-TPI
relationships also need attention. For this
­
reason, EDF Energy last month held a dedicated session for its B2B TPIs for the first
time at its annual Talk Power Conference.
The experimental session brought
together around 40 representatives from UK
third party intermediaries working in the
industrial and commercial energy market.
The session aimed to promote open dialogue between EDF Energy relationship
managers and their TPI contacts on the
challenges they face in supporting business
customers through the regulatory mire that
attends the energy market, and around ways
to make their interaction more mutually
effective.
The session focused heavily on the complexity of the regulatory and legislative landscape for industrial and commercial energy
users, flagging developments which would
need to be carefully communicated by brokers and energy advisers. Siobhan Hyland,
EDF Energy’s policy and regulation manager, highlighted some key areas that have
the potential to affect customers in terms of
costs, benefits and compliance obligations
and set a challenge for TPIs and suppliers to
“leverage the best deal” for customers.
To achieve this, it was agreed that more
could be done to ensure that a high regard
for transparency among ethical TPIs and
suppliers translates into practical information-sharing between the two groups
– though all present claimed already to be
extremely transparent with customers about
fees, commissions, etc.
To this end, TPI delegates pinpointed
smart metering as a key area of concern
where they feel they have insufficient visibility of supplier intentions to inform and
advise their clients effectively. One delegate
asked if B2B customers will effectively have
to subsidise the rollout of domestic smart
meters – an initiative which will cost EDF
Energy alone in the region of £1.2 billion.
He further questioned whether the B2B cost
implication of such a move would be spread
over the full five years of the national smart
meter rollout, or was likely to be “front
loaded”.
While there wasn’t a ready answer for this
query at the Talk Power session, EDF Energy
representatives promised to follow up with
clarification. A similar promise of news came
The Topic: TPIs
in response to multiple calls for insight into
supplier intentions around P272 – Ofgem’s
proposal to alter the balancing and settlement code for non-domestic users so that
actual half-hourly consumption data is used
for billing, rather than estimated consumption. TPIs wanted to know precisely when
and how EDF Energy – and other suppliers
– would transfer customers to the new settlement arrangements and how it will effect
contract renewal processes.
EDF Energy’s TPI workshop finished with
a series of interactive questions which surveyed the opinion of attendees on the likely
evolution of the energy market, and their
role within it, over the next five years. One
question asked delegates how they expected
TPI-supplier relationships to change, with
the following results:
•They will become more collaborative:
62 per cent.
•They will become more competitive:
21 per cent.
• No change: 17 per cent.
In the light of this indication that TPIs
have an appetite for more collaborative working, Utility Week asked Rebecca Sedler, director of EDF Energy’s B2B commercial, why
working relationships between suppliers and
TPIs had not been so strong in the past.
“Because of the strong belief that the
TPI business model has bred from supplier
service failings – and because of industry
failings,” she replied. But now, as pressure
mounts for all participants in the energy
industry to simplify customer experience,
Sedler hopes this “reticence to collaborate” can be overcome in order to maximise
the value that TPIs offer for “niche” energy
requirements.
“There’s a strong argument to say that the
emergence of TPIs has been the result of service failings on the part of large suppliers –
and as a result of complexity in our market,”
she allowed. “But I think when you look at
that very complex regulatory landscape and
at the large number of stakeholders involved
in energy procurement decisions, you realise
that having that intermediary, having that
consultant, adds quite a niche service – so
it’s not just for troubleshooting where there
are industry failings or service failings. It’s
offering guidance on these niche areas which
may affect certain businesses.” JG
* P272 has now been superseded by P322,
extending the deadline for transfer to April
2017.
Rebecca Sedler, director of EDF Energy’s B2B
commercial
CORNWALL ENERGY SME TPI INDEX – Q115 TOP 10 RANKINGS
Cornwall Index rank
Company
Contracts Index
Cornwall
Index Q115
1
Utilitywise
518
2
Make it Cheaper
5
17
3=
LSI Independent Utility Brokers
3
15
3=
Power Solutions UK
4
15
3= Inprova
215
4=
Alfa Energy
3
14
4=
Commercial Power
4
14
4=
Inenco Direct
4
14
5=
Advantage Utilities
2
13
5=
Auditel 2
13
5=
Online Direct
4
13
5=
Utility Renewals
2
13
5=
Business Advisory Services
1
13
Average Index values for all 138 TPIs
1.4
7.9
Average Index last time (Q414)
1.4
7.6
CORNWALL ENERGY I&C TPI INDEX – Q115 TOP 10 RANKINGS
Cornwall Index rank
Company
Cornwall Index
Index in
Q115Q414
1=
Inenco Group
20
20
1=
Schneider Electric
20
20
2= Utilitywise
1919
2=
The Energy Brokers
19
19
3= Utilyx
1818
3=
EnergyQuote JHA
18
18
4=
Bergen Energi
17
17
4=
NUS Consulting
17
17
4= EnergyTEAM(Inprova) 175=
Inspired Energy
16
16
5=
Power Efficiency
16
16
5=
The Utilities Exchange
16
16
Average Index (126 TPIs)
9.4
Average Index last time (Q414)
9.3
Total Index scores for SME and I&C are calculated by broker by sector as the sum of each score for Services, Finance, Employee
numbers and contracts/volume. Where brokers are profiled in more than one sector, the highest Index score is used. Maximum Index
value
= 20.
Source: Cornwall Energy, Business TPI update
FRAGMENTATION OR CONSOLIDATION?
While TPIs offer value to their clients in shielding them from the complexity of
the energy market, it must be observed that the TPI market itself has become
distinctly complex as a result of growth and diversification. There are now thought
to be over 1,000 TPIs operating in the non-domestic market offering a gamut of
services targeted at specific user groups.
While competitive pressure has already caused some consolidation to occur,
especially at the heavily saturated end of the market, EDF Energy’s recent workshop for TPIs at it Talk Power Conference, raised speculation about the scope for
further consolidation – or conversely, fragmentation – in the future.
Opinion was narrowly divided between these two prospects at the event and
Robert Buckley, a TPI expert at Cornwall Energy, said this uncertainty was a
natural product of a market that drives toward consolidation at the larger end but
which is also prone to “atomising”.
“You have to understand that TPIs are all about delivering customer service.
It’s a very people-based industry in one sense, so there’s a tendency for account
managers at larger firms to become frustrated and set up on their own and take
key customers with them,” he said.
Overall, Buckley said consolidation was likely to continue in the corporate TPI
space while the SME market would see increasing disintermediation/
Viewpoint:
More than
intermediaries: the
role of the TPI in
supporting business
I
n today’s energy industry there are now
several hundred TPIs operating in the
market who, at the most basic level, help
business customers buy energy. But the role
of some TPIs has changed dramatically over
recent years and, in response to the changing needs of customers, companies such
as Utilyx now engage in customer relationships that go way beyond assisting energy
procurement.
With approximately 50 per cent of the bill
relating to non-energy costs, it is no longer
enough just to address the half of the bill
relating to the commodity price. We forecast
that 83 per cent of cost increases between
now and 2025 will come from non-commodity price increases.
This means that what customers need
from TPIs is not just support in buying
energy. They need help managing price and
consumption together to manage total costs.
The minimum a customer expects a TPI
to be able to offer is the essentials: delivering
the best buying strategy and complying with
legislation. However, businesses also need
support in improving what they already do,
whether validating that they are paying the
right amount in energy costs for their portfolio of sites, or providing the insight and
reporting to pinpoint exactly what energy
they are consuming and where.
Taking it to the next level is essential
for more sophisticated customers, whether
building strategies to manage long-term
energy costs, carbon agendas or security
of supply. Our customers are increasingly
focused on optimising their consumption,
business processes and generation. The
best of the best are optimising their bills by
managing their processes and buildings to
minimise their exposure to high prices.
The complexity facing customers in managing their energy costs has grown significantly in the past few years. What customers
want is end-to-end support. Energy management has moved on, the services offered to
support customers have moved on. The role
of the simple broker is no longer enough to
support business in today’s energy world.
Jo Butlin, managing director, Utilyx
UTILITY WEEK | 3RD - 9TH JULY 2015 | 13