Power Struggle

Mar 18, 2019 • FeaturesLeadentmanagementBritish GasutilitiesCustomer Satisfaction and Expectations

Underpinned by regulation and historically reluctant to embrace new technology such as big-data, the utilities service sector finds itself at a crossroads. Will 2019 be the year of the customer with industry watchdogs taking a back seat? Field Service News' Deputy Editor Mark Glover finds out more....

I write this article in the second week of January. An odd time when faded Christmas trees lay abandoned in gardens, and flashes of tinsel peek through wheelie-bins. Festive memories seem a long time ago and the summer seems even further away as we return to work. We snooze the 6am alarm, reluctant to step into the cold morning.

Symbolising this grim time of year is the broken boiler. Plummeting temperatures mean faults are common and energy companies come under pressure to respond and to deliver first-time fixes. Customers, particularly on a cold January morning, want radiators hot and their showers hotter.

In Britain, central heating was introduced in the 70s. Then it was seen as something of a luxury. Today it is seen as a basic requirement, we miss it sorely when it’s not around so when the boiler flame goes out, we demand a quick response from our supplier. An expectation affirmed by the Uber and Amazon delivery service-times we operate in.

So has the utility sector adapted to the modern customer demand and if not,what does it need to do to keep up? Are they instead content to just keep their regulators at bay? And what about technology adoption? Do firms still feel uncomfortable dipping their toes in big-data lakes?

Historically, utilities have felt ring-fenced from competition. The majority of companies have a monopoly over the areas they supply. Investing in complicated and costly digital strategies has never been high on the agenda. Stephen J Callahan IBM’s VP of Global Strategy and Solutions for Energy and Utilities explained why outfits remain sceptical in an article for RDMag in 2015: “The analytics opportunity for utilities is clear,” he wrote, “but there continues to be a lack of real push and value delivery. Companies have been concerned about the high costs and complexity of data. “Technology shifts, regulatory changes and the emergence of empowered consumers all demand a new approach to customer engagement. With analytics, energy companies can make the shift to engage with customers in highly personalised ways that can increase customer satisfaction, lower the cost of service and promote new products and services,” he urged.

For UK energy companies, customers switching tariffs and regulation from the Office of Gas and Electricity Markets (OFGEM) are the main drivers influencing its customer strategy. Transparent costs and price comparison sites have
made swapping easier for consumers and in 2016, 4.8 million frustrated households did just that. Their main reason? Poor customer service.

That said, despite the numbers, and a strong PR campaign around the ease of which it can be done, the rate of switching is perhaps not where OFGEM want it to be. “I think switching is happening but probably at a lower level than the regulators would be aiming for,” explains Laurence Cramp from Leadent, a managing consulting and technology business specialising in field service. “Mainly because people are using the supplier in their area and they’ll stay with that supplier.

“It also comes from the fact that tariffs are all in and around the same range so consumers tend to be paying about the same price for their energy. The customer service may be better or worse at some or others but that’s not necessarily linked with what billing platform they’ve just integrated. I think people probably look at the power sector and think it’s much of a muchness.”

In the UK, British Gas, SSE, EDF Energy, npower, E.ON UK and Scottish Power form the “Big Six”, the suppliers who provide the majority of energy to the UK. Smaller and more streamlined energy companies, with a strong focus on service exist, yet consumers seem content to stick with the top names.

Of those, British Gas is the UK’s largest energy supplier and can lay claim as the world’s first public utility company. Set-up in 1812 as The Gas Light and Coke Company, the firm provided customers with coal-based energy. The sector, and technology, has moved on considerably – not least with the advent of electricity – and British Gas has done its best to keep-up, adopting technology to enhance its customer service processes. It recently rolled-out its ‘On My Way’, real-time engineer tracking facility, enabling customers to see the precise location of the engineer, producing an accurate arrival time for time-starved customers.

"In 2016, 4.8 households switched energy supplier. Their main reason? Poor customer service..."

Tim Andrew is the CEO of Localz, the company behind British Gas’ location tracking technology. He says 2019 will see utility watchdogs push companies hard when it comes to customer service. “Regulators continue to increase their focus on customer experience, using both penalties and incentives to drive same-year measurable improvements,” he predicts.
“This year will show that the companies who outperform the industry, continuously focusing on providing transparency and control to consumers, rather than running a project to meet the minimum regulatory requirements.”

Consumers are hamstrung to the area they reside: Southern Water, Thames Water, Yorkshire Water for example, with customers unable to switch tariffs. With consumers locked-in to contracts, how are suppliers kept on their toes to ensure they deliver on customer service?

Here, the Water Services Regulation Authority (OFWAT) keeps economic tabs on companies. Set-up in 1989 following the privatisation of England’s 10 water authorities, it carries out a review every five years with this year (2019) being the next period of scrutiny.

This cycle will see companies adopting a Customer Measure of Experience (C-MeX) incentive approach, intended to focus firms on delivering a high-standard of customer service. C-MeX supersedes Service Incentive Mechanism (SIM), a customer satisfaction survey carried out four times a year by the regulator, and will link financial incentives to the performance level of the best performing companies.

Cramp believes the new approach will spur-on companies, through the use of technology, to be more comprehensive in their customer focus. “C-MeX is there to encourage firms to be more holistic and rounded in what they do for their customers,” he says. “This is a good time for water firms because they’re now all gearing up for the next five years and undoubtedly customer service is a really big part of that with a lot of focus on investment in technology to help
with that.”

However, he suggests the water companies are some way behind their energy counterparts who, driven by their own regulator OFGEM, have already integrated such initiatives “I see the water companies playing catch-up with where the power utilities were five years ago. I think the energy regulator has been on that case a little bit ahead of the water companies than OFWAT,” he says.

The utilities sector is a broad market, however like field service, which straddles numerous verticals, there exists an opportunity to share best practice across its own verticals: water, electricity and gas. Is it possible for the energy sector to extend its five years of technology-focused customer learning to its water counterparts?

“In our daily lives we take a great experience from one industry, and get frustrated when that isn’t available in another,” says Localz’ Tim Andrew, who is adamant it can. “As a business, trying to meet, let alone exceed customer expectations by
taking input from just an internal or single industry perspective is futile. Cross-industry collaboration and product development is critical.”

As well as working together, the sector needs to invest sensibly in technology, particularly around customer service. There are murmurings that this is starting to happen, particularly in the water industry but how long this will take is even less clear. Studies suggest that worldwide firms are setting aside funds to do just that. In 2015, GTM research anticipated utility company spend on data analytics growing from the $700 million spent in 2012 to $3.8 billion by 2020, a huge leap but it need not be a leap into the unknown and at all times, the customer should be at the heart of any decision.

“Becoming a customer-centric, information driven organisation is no longer simply an option for most utility companies. It’s a business imperative,” Callahan said in his 2015 rallying call to the utilities sector. Four years’ on, will his words have had an impact?

Watch this space.