Whitepaper
Big Billing – the meter is running
sqs.com
Are your systems prepared for the power and shielded from
the shocks of a smart energy retail market?
Introduction
While the leading energy suppliers are getting fired up by the
opportunities in a smart-metered market, they would do well
to consider the fact that their new entrant rivals too will be
greatly empowered by the digital days ahead. Weight-for-weight,
perhaps even more so.
Energy suppliers are looking to upgrade their billing and
customer information systems to turn the huge amount of data
from smart metering into revenue, and avoid it becoming a
drain on their businesses. But flaws in those system upgrades
could mar a supplier’s relationship with its customers to a
degree that eclipses the considerable opportunities in smart
metering.
So before immersing themselves fully in the smart metering
game, energy retailers need assurance, through sound testing,
that their ambitions neither outstrip their budget nor underplay
the opportunities and challenges ahead.
Authors:
Angus Panton
(Director of Power and Communications)
[email protected]
SQS Group Limited, United Kingdom
Dr Trevor Loveday
Published: November 2014
SQS – the world’s leading specialist in software quality
Whitepaper | Big Billing – the meter is running
Big and getting bigger
Once a smart-metered energy sector is in top gear the established players will be under pressure to keep up a pace set by
others. The rush of data and communications that will arise
from smart metering will equip energy suppliers, new and
established, to create new products and services. New entrants
to energy retail will, however, have the agility and speed that are
virtues of their size and systems unencumbered by legacies
from previous incarnations.
The business openings created by smart metering mean that
large and small players need to rethink the tenet that says IT
investment should be bounded by current needs. While they
will have to keep up the established throughput of billing and
maintain their customer relationship management they will also
have to accommodate the opportunities that come with nearreal-time data including demand response, prepayment growth
and time-of-use tariffs. This is big billing. And it will get bigger
and systems need to be equal to that growth.
Energy retailers are devising tactical plays into pinpointed
market segments, greater interaction with consumers via connected devices, and even forays into entirely new, non-energy
markets. If they are to realise these ambitions they will all need
competencies in billing and customer information that are orders of magnitude greater than current needs require and that
existing systems support.
Energy retailers need assurances their system upgrades will
hold up once they venture forth into a data-dominated market.
After all, in looking to make radical changes to data systems,
the retailers will find themselves stripping down the engine that
keeps their business on track. There can be no spanners in the
works.
Before pressing the button on the overhaul of their billing and
customer management, energy suppliers will need to foster
closer dialogue between information professionals and the
board of directors. A trusted facilitator in that communication
would be valuable in ensuring that all sides of the operation
understand the impact that failures could have on the business’
ability to stay competitive.
© SQS Group 2014
Change will be paced far higher than any change energy companies’ have experienced before. Just surviving will require a
clear strategy for change. With so much at stake the winners
will be players who put their capability through the fullest and
most effective scrutiny using tried and tested measures.
Just how big?
The connected home, micro-generation, the smart meter, and
electric vehicles among other developments are poised to raise
the temperature of energy retail competition. At the same time,
regulatory interventions on price and service are upping the
pressure on energy supplier margins.
So the need to reduce costs is growing at the same time as investment in a far-reaching systems review is becoming crucial.
And fired by a need to retain and win customers, energy players
are deliberating on expansion beyond their utility operations.
According to market analyst, Quindi Research, “The permutations are very diverse, but many [utilities] embrace the idea of
using non-commodity and value-added services to create highly
differentiated propositions.”
Ahead of considering any of the complexities of gearing customer information and billing systems to handle cross-selling
and new digital commerce, it is worthwhile to note that the
back office impact of even the limited smart metering currently
in play is yet to be felt fully.
SQS’s Jack Coxeter points out: “Not a lot of the installed smart
metering is operating in smart mode. DECC’s last figures
showed about 345,000 were working in smart mode but the
other 791,000 are just smart-type meters. And 50,000 SMETS1
smart meters are not operating in smart mode.
“There’s an underestimated challenge in what testing is needed
to get these things operating properly. And it will go on after the
smart meter roll out to get them fully integrated and operating,”
says Coxeter.
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Whitepaper | Big Billing – the meter is running
SQS’ Chris Abbott looks deeper into this: “Suppliers have often
made architecturally compromised decisions in the interests of
money. And those decisions compromise data quality.
Smart meter for efficient power management
Smart energy
monitor
Smart meter
Utility
Energy provider
Smart energy
report
“With legacy systems the challenge is not in the quality of
operation. The operators know their systems inside out. But the
systems can’t cope – they were designed for a different landscape. And it’s not the legacy but the complex, multi-platform
environment and things around it – there is a mismatch of
things being pushed together. Data is the number one problem.”
Billing-related issues accounted for 84 per cent
of complaints to the Energy Ombudsman between
January and June 2014
Source: Energy Ombudsman Annual Report 2013/2014, Ombudsman Service
Customer interface
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Decisions, decisions
The big six energy retailers are not starting their journey into
the world of smart metering from an ideal position. True,
preparations for the challenges of big data are exercising the
energy industry. And the main players have made changes to
migrate data from incongruent systems to more consolidated
architectures. But there are questions that need to be asked
about whether the resulting architectures address the disparate challenge fully or are more a product of competing IT and
financial concerns
Abbott warns: “With so much coming on – new markets, smart
technology and so on – you’ve got to keep your eye on the
prize. You have to be smarter, slicker, and faster at dealing with
all the things you have to do and that you’re finding moderately
difficult, such as regulatory compliance, and the things that
make you money. Meanwhile you have to deliver on other
changes to keep ahead of the competition. If you just deliver
the business as usual at the current cost of those changes, it’ll
damage your business.”
Recent examples have demonstrated the harm that can arise
during changes to billing and customer interface systems. At
least three of the big six companies have fallen foul of customer
ire and dissatisfaction – and the subsequent wrath of the regulator – following errors in newly implemented systems.
To illustrate this further: billing-related issues accounted for
84 per cent of complaints to the Energy Ombudsman between
January and June 2014.
The challenge is to find a balance between migrating from legacy
systems to upgraded customer service and billing that will allow
for change while keeping customer disruption in check.
It’s not the legacy but the complex, multi-platform
environment and things around it.
© SQS Group 2014
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Whitepaper | Big Billing – the meter is running
The legacy systems currently in operation in the energy supply
sector lack the flexibility and efficiency to respond to smart
meter-related market trends and customer expectations. But
for established retailers any upgrade strategy will include extracting the most from current and legacy systems to preserve
return on investment.
New entrants to the sector however are not weighed down with
the same challenges. They are, in fact, set up to be more fleet
of foot in bringing products to market.
According to Quindi, as smart metering is ushering in novel
offerings from new entrants to the UK energy market, it is also
attracting new vendors of billing and customer information
services possibly to add to the energy market newcomers’
arsenals: “As new types of service proposition and service
provider emerge to challenge the classic utility model, there
will be an increasing demand for modern, flexible billing and
customer care solutions that can accommodate widely varying
combinations of products and services,” the researcher says.
It adds: “We believe this will allow the emerging challengers
to the traditional utility solutions vendors to gain a foothold in
this sector and reshape the vendor landscape,” says Quindi.
Being prepaid
With smart metering in operation, prepayment has the
potential to become a more attractive option for suppliers
and for consumers outside its conventional market among
low-income households. In realising that potential, energy
retailers will encounter unresolved data issues.
Smart metering should reduce the cost difference between
credit and prepayment in a number of ways. With all consumers using a common meter type the difference in capital
cost between prepayment and credit meters will go. Also
being able to switch smart meters between credit and prepayment will eliminate further costs.
These cost reductions could spark competition between
suppliers for prepayment meter customers through price
and tariff offers and mobile phone-type incentives. Should
numbers of customers on prepay increase, extra fixed costs
of prepayment administration would be spread.
About 13 per cent of customers in Great Britain currently
pay for their energy by prepayment. Smart metering is
widely expected to increase that substantially with forecasts
running at about 30 per cent.
According to the chair of the National Right to Fuel Campaign’s Smart Metering and Prepayment Working Group,
Tim Smith: “For the energy suppliers the smart prepay opens
the door to simple low-cost payment methods including pay
by phone. In short, it should be the moment to revolutionise
the market and create a vibrant segment which is attractive
and becomes price competitive.”
While expanding prepayment promises much, it too will
up the data burden and the need for assurance that the
systems will deliver. Industry processes for managing prepayment top-ups for smart meters have yet to be settled,
as have standards for messages for encrypting prepayment
top-ups.
“We are going to see more prepayment with the advent
of smart metering, this will mean additional prepayment
interface devices and tariffs to test and an increased amount
of end-to-end integration testing for prepay channels,”
predicts SQS’ Jack Coxeter. That will mean still more testing
of top-up payment and emergency top up with the DCC.
© SQS Group 2014
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Whitepaper | Big Billing – the meter is running
Down the line
as approaches that span both to get the end business result,”
he says.
Clearly, customer information and billing upgrades will be among
the highest of risks to the ambitions of energy businesses. The
companies will need assurances that their billing and customer
correspondence are sound enough to withstand, not just the
immediate challenges that come with smart metering, but they
will need also to be able to assess the capacity as well as the
resilience and adaptability of their systems to future challenges.
Energy companies can benefit significantly from having a
partner focused on testing who can provide assurances that
vendors do not provide and guidance to help them articulate
to their vendors what they want. Communication within the
company too is essential: “Utility IT is siloed more than ever,
so better communications across groups is needed,” says
Abbott.
Critical assessments might include:
“It is important that, in testing, utilities work with someone who
shares their agenda and who is not following their own. This is
difficult to find. The utility needs someone who doesn’t have
a vested interest in whether a test is passed or failed because
the important thing is that the utility knows what has, or hasn’t
passed and can make a decision on that basis.”
• the capacity of data management and billing systems to
support smart metering;
• integration of web services with mobile technology;
• the degree to which the multi-utility and multi-service billing
platform supports billing; and
• the usability of the web-browser interface.
It is important that, in testing, utilities work with
someone who shares their agenda and has no other –
this is difficult to find.
In seeking assurances of future-proofing Abbott counsels a
business focus: “Let business process lead the testing. Be
system-agnostic and consider legacy and new options as well
Multi-Platform Customer interaction for electricity, gas and water utilities
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© SQS Group 2014
Manage Account
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Goals
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Whitepaper | Big Billing – the meter is running
Coxeter highlights just how demanding an undertaking smart
meter performance testing is. There are often many vendors
involved – he cites instances of close to ten – creating a complex web of interactions. The data is huge in volume and great
in associated risk to the business. “Performance is difficult to
test in an integrated setting but the risk is high when you test
as individual components. Suppliers should recognise the risk –
then they will realise the need to invest deeper in test facilities.
Meanwhile today’s major players need to upgrade their systems
to ones that are designed and built to handle real-time, highvolume transactions. Once in place, they could offer energy
retailers, and their customers, benefits in new products such as
demand response tariffs and sophisticated prepayment deals
and a sound customer experience across energy and possibly
non-energy products delivered through conventional and digital
platforms.
“Where a full, end-to-end test environment is not available,
systems invariably go into production without sufficient testing
or, potentially worse, the testing is conducted in a live environment.”
But inadequate systems leading to errors in billing and other
flaws could sink suppliers’ ambitions for the digital market.
Early shortfalls in performance at the customer interface would
have all of the opposite effects on trust, reputation, and marketing opportunities anticipated from closer connections with
customers.
Regression testing – scrutiny of the impact of each additional
element in a system – is, says Coxeter, a large area of testing
where vendors are not best equipped to contribute. A bespoke
test strategy is vital says Coxeter. This, he adds, should bring
together physical testing in replica domestic metering environments with large-scale, end-to-end testing using simulation as
well as test harnesses and automated set ups.
Establishing a smart metering test strategy is essential and,
given its scope and the need to involve a crowd of stakeholders,
it is clearly urgent.
The final demand
Alignment with smart metering, multiple tariff offerings and
possibly new, non-commodity lines of business will demand a
transformation in energy retail billing and customer relationship
management to something much bigger, broader and yet more
flexible. Once universal smart metering is in place, the pace
and direction of change could be unprecedented and driven
by new entrants, unfettered by legacy systems and tarnished
reputations.
© SQS Group 2014
And to up the ante further, energy retail competition will
increasingly be in service and reliability. Stiffer regulation and
market interventions by policymakers are leaving little room
for differentiation on price.
Given the degree to which billing and customer relationship
management will underpin energy retailers’ business ventures,
upgrading systems for big billing clearly carries risk. That risk
must be communicated so there is a shared understanding
with organisation’s management as well as its IT professionals.
Finally, the risk can only be mitigated through rigorous scrutiny of options and testing based on independent insight and
knowledge.
So the choice of a partner in testing could prove to be one of
the more important decisions an energy supplier has to make
as it heads into new markets, driven by data.
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Whitepaper | Big Billing – the meter is running
About the Author
Angus Panton heads the Power & Communications business unit within SQS UK, focused on the Utilities, Energy Trading, and
Communications sectors. With ten years’ specialising in software testing at SQS, he has seen how important systems quality
to underpinning change in these areas.
He is also the co-inventor of an award winning recycling product, and with young children and elderly parents has a particular
interest in how connected devices can facilitate senior care, and keep track of wayward kids.
Contributors from SQS
Chris Abbot – Managing Consultant, ERP Practice
Nathan Jones – Delivery Director
Jack Coxeter – Principal Consultant
About SQS Software Quality Systems
SQS is the world’s leading specialist in software quality. This position stems from over 30 years of successful consultancy
operations. SQS consultants provide solutions for all aspects of quality throughout the whole software product lifecycle
driven by a standardised methodology, high offshore automation processes and deep domain knowledge in various industries.
Headquartered in Cologne, Germany, the company employs approximately 4,000 staff. SQS has offices in Germany, the UK,
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In 2013, SQS generated revenues of 225.8 million Euros.
SQS is the first German company to have a primary listing on the AIM (Alternative Investment Market) in London. In addition,
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With over 7,000 completed projects under its belt, SQS has a strong client base, including half of the DAX 30, nearly a third
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Commerzbank, Daimler, Deutsche Post, Generali, JP Morgan, Meteor, Reuters, UBS and Volkswagen as well as other companies
from the six key industries of SQS.
© SQS Group 2014
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Whitepaper | Big Billing – the meter is running
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