Massara’s mission: transforming Npower’s customer service is harder, and pricier, than the CEO thought

Energy company earnings have taken a hit across the board in 2014. But for one man, gloomy financial reports might weigh more heavily than for most.

Npower chief executive Paul Massara heads the big six supplier with the worst reputation for residential customer service at a time when the political pressure on energy companies has reached pre-election fever pitch and the Competition and Markets Authority’s industry probe is in full swing.

In addition, the UK arm of German energy giant RWE last week posted operating results 26 per cent below the previous year’s, in part due to the company’s need to address its customer service woes.

The rest of this year will not be an easy time for any energy company. But for Massara the year began with media speculation that he could be axed by power’s German parent company because of poor performance. He now has just nine months to make good on the ambitious targets he set on taking up the role two years ago – to climb from the bottom of customer service polls to the top by the end of 2015.

Bold aims have been met with bold action, but the costs have added up.

In its 2014 financial report, RWE acknowleged that low temperature-led demand weighed on Npower’s earnings, as it did across European markets last year.

On top of this, the UK supply business “had to cope with a number of burdens” including a 6 per cent drop in residential customer numbers and “higher than expected” costs relating to a customer service restructuring, the parent company said.

An Npower spokesman declined to comment on just how expensive an operation the company’s customer service overhaul has proved to be, or how much “higher than expected” the costs have run. But the group’s explicit concern over these mounting costs w ill do little to quash speculation that Massara’s role at the company is precarious.

Npower’s business relations manager, Dan Meredith, was quick to “categorically deny” the January reports, saying Massara is not going anywhere. He does admit, though, that the process of bringing change to the culture and processes of the business is “taking longer than expected”.

Once you start “digging up the drains”, there are often deeper problems than you realised were there before you started the job, he said.
Npower’s customer service problems stem from 2013 when a new billing system was implemented to replace three separate regional systems. Teething problems resulted in some customers not getting bills for up to a year, while others received inaccurate bills or bills for accounts that weren’t their own.

By the end of 2013 Massara, after less than a year in the job, was forced to make a very public apology to his 3.4 million customers, and pay a £3.5 million fine from Ofgem for mis-selling.

At the time of his apology, Massara promised that the problems would be in hand by spring 2014, but customer service complaints continued to translate into lower customer numbers.

According to the Which? energy company satisfaction survey published in January, Npower was still rated the worst for complaint handling and customer service, scoring a meagre 35 per cent. This was closely followed by Scottish Power with a score of 41 per cent. EDF and British Gas scored slightly higher with 49 per cent, while Eon and SSE both scored 50 per cent.

But the household market is not the only segment of the Npower business on which Massara will be judged, and in many ways “it is the anomaly”, the spokesman said.

Npower sells twice as much energy to business suppliers as to residential users, and while its residential business has hemorrhaged numbers as a casualty of rising switching rates, the business supply side has seen the opposite.

B2B energy supply is an increasingly competitive market requiring strong relationships and bespoke solutions. In this arena the supplier is gaining market share, with its base growing 6 per cent last year while all other suppliers held their position or lost market share.

The aim is to mirror this success in the more visible household market in time, but Npower is unlikely to achieve this according to Massara’s timetable.

The spokesman admitted that he would be “very surprised” if the supplier manages to reach the top spot for customer service before the end of the year.

“But this shouldn’t be taken as a failure,” the spokesman said. “It was always an aspirational target. And we won’t stop working towards it until we are there.”