Data will help TPIs and suppliers survive the microbusiness review

September 22, 2020

This article on surviving the microbusiness review was first published on energylivenews.com

By Paul Linnane, Head of EMI

The energy market is currently undergoing the most significant change since deregulation over 20 years ago. New models and offerings such as flexibility services, distribution system operation, vehicle-to-grid technology and peer-to-peer trading have captured the imagination of consumers, innovators and regulators.

An equally important area of the market which historically has had less focus is Third Party Intermediaries (TPIs), which support over 2.2m microbusiness customers and £3.5bn in annual spend.

However, the microbusiness market is now under the microscope. Following the Competition and Markets Authority’s initial review of price transparency in the microbusiness energy market, Ofgem has added the strategic review of microbusinesses to its forward work program.

To improve the benefits the microbusiness consumer receives from engaging in the switching market, Ofgem has indicated that they may need to introduce new license conditions for suppliers, which could change the way that TPIs and suppliers interact forever. Data and transparency are high on the list of improvements to ensure better outcomes for customers and ensuring that a small number of sharp business practices are eradicated from the market to provide confidence.

At ElectraLink, we have been working with TPIs for some time and have built an understanding as to how processes can be improved to mitigate the effects of potential changes for TPIs and suppliers.

In a scenario where the supplier is responsible for the perceived and actual value to the consumer within the microbusiness market, data is necessary to bring to life new processes, customer guidance and information to help businesses achieve the outcomes that the final recommendations of the Ofgem review wish to achieve.

Consumption data (for microbusinesses as well as large half hourly consuming sites) at the point of quoting is invaluable in helping end consumers obtain the correct energy deal on the correct tariff with the correct tolerances for over/under usage which can lead to conflict if poorly understood.

Unlike domestic energy where customers can be categorized by low, medium and high usage, there is no “standard” microbusiness. Hairdressers are different from builders’ merchants or kebab shops, and even the variation between these distinctions can be vast. This makes it difficult to estimate what a microbusiness might use. A transition to utilising data based on real usage will increase confidence for the customer and builds trust between all parties. This is especially true when the consumption data is the same data that underpins the industry settlement process which drives energy supplier costs.

Using the same data which drives settlement, rather than self-certified data, can also remove the delays associated with customers knowing their consumption at the point of quote, as well as the manual processes of updating information. This automation can improve the transition of microbusiness engagements from direct dialling to other methods such as web based or app based switching, which provides greater levels of customer self-service and standardisation to improve the transparency in the process, and reduce the subjectivity which can accompany the more traditional and currently prevalent telesales process.

The benefits of improved data reliability also go beyond providing better outcomes for customers. This data allows suppliers certainty that commissions are accurate, and allows TPIs to better understand their revenues and cashflows, especially during times of difficulty and uncertainty stemming from COVID-19.

It is clear from our industry monitoring that businesses have closed or reduced output during the pandemic. Currently, acquiring accurate consumption data for new contracts can be challenging as current consumption and invoices will reflect the impact of the lockdown in the short term. That is why, as well as current data, historical data is also needed to smooth out or account for any significant periods of abnormality.

ElectraLink customers currently benefit from a new API which provides additional customer consumption information related to the period before the lockdown so that suppliers and TPIs can better gauge the energy usage of the customer and compose the best tariffs for switching. This is just another example of how better data and insight can help improve customer and supplier outcomes when transacting for microbusinesses.

Once Ofgem implements the actions from the strategic review of the microbusiness energy market, data will be essential to help TPIs and suppliers meet new requirements, support accurate quoting and provide precise monitoring of the microbusiness customer journey, with better outcomes for customers and better insights for the market. I look forward to seeing how the new normal blends with the changing face of energy for micro-businesses.

If you would like to find out more about how data can support TPIs in the energy market, join ElectraLink’s webinar, Leveraging energy market data as an enabler of the switcher’s journey, on 29 September. Register for the webinar here.

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