Split data suppresses customer service, and smart meters could make it worse

The disconnection between data management and processes is constraining utilities from improving customer service – and this could get worse with the arrival of smart metering, says Jon Slade.

In a climate of intense scrutiny and public pressure, energy suppliers have been taking large strides to improve customer service performance. Yet despite the retail market’s shift to a more customer-centric approach, customer perception remains poor in comparison with other industries.

Before the retail market can hope to gain traction with the new products and services it is developing for the benefit of customers, we need to tackle the root cause of issues with customer satisfaction.

For so many service issues, that root cause is data: how customer data flows around the industry and how suppliers manage that data within their own billing and operational systems. And, with the opportunity presented by smart meters, the imperative to manage, control and maintain customer data better will only increase (see p25).

If we look at billing errors, direct debits set at the wrong level, switching delays, erroneous transfers and missing meter reads: they’re all caused by a data issue. That issue takes place either in a back office system, a billing system, or a finance system. Handling and resolving these problems takes customer adviser time, adding to call-time concerns. But why is data such an issue?

It’s partly to do with the way our industry is set up. In almost every other single retail business, inventory, revenue and customer management are intrinsically linked. A supermarket knows how much stock it has, how much its customers are buying, and whether demand is increasing or decreasing.

In energy, that level of insight simply hasn’t been achievable historically. Meters are read infrequently, and customers pay for the product not at the point of transaction, but months after they have used it (and months after their suppliers have paid for it).

This complex structure means that the customer data needed by suppliers to manage their accounts is treated differently, and separately, as it goes through the processes used to procure energy while also feeding the bills that suppliers send to customers.

Industry costs are billed to suppliers at a portfolio level and, in the absence of supply point intelligence, costs have to be smeared across a static customer base and reconciled months later.

Without reconciling these industry costs to supply point level, customer-level data simply doesn’t exist. In its absence, customer “average” profiles are used to shoehorn millions of households with wildly different consumption patterns into profile types. These are used by industry to calculate what to bill suppliers at a portfolio level for the energy their customers are believed to have used.

This process was established in a pre-privatisation era. Fast-forward two decades and it remains the method to calculate costs. There are almost 30 million supply points in the UK, but just a handful of average profiles that dictate each customer’s assumed consumption shape for the purposes of estimated billing and settlements.

Despite the huge evolution of our industry in the past two decades, suppliers remain constrained by the industry structure which has been inherited.

But if suppliers aren’t able to understand their revenue position at a customer level, by connecting their billing and tariff data with industry data and using that insight to adapt accordingly, how can they adapt to the increasingly high expectations of transparency and billing accuracy that are being placed on them?

The rollout of smart meters is seen by some as the panacea to these issues, heralding the end of estimated bills and a greater ability to structure supply businesses around the customer. Without doubt, smarter technology and accurate consumption data will make great inroads to solving the data problem: a customer-level approach will be expected of suppliers. But it won’t be the end of the issue.

Under smart, the data flows currently passing through industry processes will increase to hundreds of thousands. And unlike industrial and commercial markets, domestic smart meters won’t be settled half-hourly: the fundamental issue of customer data split between processes and systems will remain. There is a real concern that the data problem will remain, or become amplified.

So how can suppliers address this root cause? By getting to grips with their data.

Suppliers have to manage two streams of data: the first is to and from industry bodies and provides them with high-level supply costs. The second, from the customer, provides them with meter reads, payment information and changes to their account. If these two streams aren’t reconnected before entering operations and billing systems, the kind of complications and problems that create customer complaints can occur.

But there is a better way. Reconciling industry and customer data into a single source gives suppliers far greater insight across the customer journey, and unlocks opportunities for energy cost recovery and operational performance improvement. Currently, a supplier needs to investigate a number of workflows to see what went wrong with a customer account, requiring time and resources to rectify issues. Using a single, consolidated and reconciled data source enables suppliers to identify far more quickly that, for example, a missing meter read has caused a large bill shock, which can then be rectified.

The industry has the opportunity to move on from these legacy systems and function more like a typical retailer, understanding how customers use their product, and matching up what they’ve used and how much they’ve paid. That level of insight in energy would facilitate a better customer experience, by helping to reduce complaints and, for example, by enabling suppliers to set more accurate direct debit levels and improve the time it takes to switch suppliers. It would also provide far greater accuracy for financial management by basing financial forecasts on accurate insight rather than unstable assumptions.

Transforming the way energy suppliers manage data is a huge opportunity to  tackle the root cause of many customer service problems and stand out through excellent customer experience. We can’t afford to ignore this any longer.