The big six for 2020 and beyond

Matthew Vickers, chief executive of the Energy Ombudsman, shares his take on some of the key trends, battlegrounds and opportunities as a new decade begins.

As 2019 brings the end of an era for one big six, here are my thoughts on another. It’s not an exhaustive or exclusive list but here are six themes which will shape the market; some for the next year, some, perhaps, the next decade.

1. Transition and trust

It’s hard to overstate the importance of trust in the energy transition. The author and influencer Rachel Botsman defines trust as, “a confident relationship with the unknown”. Getting to net zero involves all of us changing our behaviours and adopting new products, new services, new practices and new ways of thinking and living which are unknown. There are massive opportunities for innovation and investment in infrastructure which depend on earning that trust and confidence.

2. Journeys and ecosystems

The retail market is changing rapidly with the emergence of community energy, peer-to-peer, connected homes and vehicles, and energy, heat and mobility as services. Companies have seen the opportunity for services as the engine of both future growth and progress to net-zero. The market is becoming a complex and fragmented ecosystem. Digitisation, decentralisation and decarbonisation might be the Ds everyone’s talking about, but they’re nothing without delivery.

Translating good intent and exciting visions into better outcomes for consumers comes down to execution. That will look very different in a world shaped by data, partnerships and platforms rather than traditional patterns of generation and distribution.

3. Regulation gets micro

Nationalisation may be receding on the risk register for utilities, but it’s clear there’s still a huge job to be done around convincing the public that they can trust energy and water companies. The macro question of public ownership seems set to be replaced by a micro focus on improving outcomes for individual consumers.

The Competition and Markets Authority, National Infrastructure Committee, National Audit Office and Public Accounts Committee have all signalled much more attention to this micro level to demonstrate how regulation is improving fairness for individuals rather than theoretical cohorts. Competition law has proved too slow in tackling this – redress will need to respond.

4. Competing for margin – caps, service and price

There’s intense competition around price and, as the costs of supplier failures have been mutualised, the pressure on cashflow has redoubled. Suppliers have to reconcile efforts to improve efficiency and margins with undue risks to service, loyalty and trust. Digitisation, offshoring and collections are all opportunities to become more efficient but they also pose risks to consumers and in particular the most vulnerable.

5. Scalability

As the shape of the market changes, the ability of challenger brands to serve larger and more disparate customer bases will be tested. In our own work, we’ve seen the volume of complaints we receive from outside the ‘Big Six’ outstripped by complaints concerning small and medium suppliers. Sustainable growth will depend on challenger brands being able to deliver on price and service at scale and 2020 should prove who’s up to it.

6. Mergers, acquisitions, platforms and culture

Scalability can bring the associated challenges of integration. There are several large scale integration projects ahead in the retail market and these always bring significant risk.

Throughout our fourteen years as Energy Ombudsman, complaints about billing have made up the bulk of problems brought to us. Poor management of replatforming has been the major historic cause of detriment, damaging consumers and destroying brand reputation.

Managed services are needing to become more flexible and responsive and are themselves facing competition from systems and services built by some of the newer suppliers. Finding platforms which can support great customer experience with efficient delivery will be part of the solution. However, delivery will continue to revolve around people. Culture and customer focus are even more challenging to scale than systems and as such will be an even more distinctive and defensible advantage in the market.

The 2020s must be the decade when the transition picks up real scope and pace. They, and we, will be defined by our ability to build trust in a new and very different energy market. Technology, data and innovation will shape the decade in ways we can only guess at but execution, partnerships and people will still decide the winners and losers. Only this time the stakes are not just corporate, they’re global.