How Can The Big 6 Respond To The UK Energy Crisis?

Two weeks ago PFP Energy and MoneyPlus Energy ceased trading. Last week Utility Point and People’s Energy joined them. This week they were joined by Avro Energy and Green Supplier Ltd - known as Green.

Every week, more British energy companies are going under. The problem is complex and has many variables, including a reduction in gas storage and insufficient price hedging, but the bottom line is that right now every energy company has to pay far more for gas than they can charge their customers, because of the energy price cap.

They have to sell at a loss. Only the largest suppliers, with the strongest balance sheet, could possibly ride out a period where they cannot make any profits. The biggest concern across the industry is that the price increase is not expected to just be a spike - these higher prices might stick around for some time. Some analysts - including the former CEO of Green - are already saying that none of the British energy companies outside the Big 6 will survive.

Customers are being urged not to worry - even as more than six million homes are potentially looking at losing their energy supplier. Ofgem has procedures in place to ensure that if an energy company fails then customers (and any cash balances) are passed to alternative suppliers.

For the end customer, the main concern will be losing any fixed tariffs or deals they had with the previous provider - they will not see their gas or electricity switched off.

The real problem is for the remaining energy companies. Even the failure this week of Avro and Green alone adds around 830,000 customers that need to transition to a new energy company. That’s just this week. If the analysts are right, there will soon be millions of energy customers transitioned to a new company.

But who would welcome all these new customers when there is no chance that any profit can be made? It can only increase losses. In the long term, a boost in customer numbers may be a good thing, but for the foreseeable future the Ofgem mandate forces the bigger energy providers to lose cash because they have to adopt these customers.

There can only be one strategy in this situation - drive the cost of servicing these customers down as low as possible. I don’t mean that the customer should accept an intolerable level of customer service - I mean that all the big energy companies need to be exploring how to reduce their cost to serve all their customers RIGHT NOW.

Immediate steps should include:

1. Improved self-service: many customers will ask a search engine for help before calling a customer care line. Are they getting any helpful results? If not then why not? Investing in some explainers on YouTube can prevent thousands of calls ever being required. Think like your customer.

2. Automation: chatbots can work really well if you choose where and how to deploy them. Don’t just rely on the bots for everything, however they should be enabled for all routine enquiries. Basic questions should always be answered by bots. A comprehensive digital strategy can drastically reduce the cost of serving all routine enquiries.

3. Offshore: right now you need to focus on continuing to deliver customer care and getting costs down so find an offshore partner that can help you with a more blended solution in future - but for now go offshore and reduce costs.

The energy companies have no choice. If gas prices are not going to go down for some time then every new customer they accept will increase their losses. The only possible strategy is cost mitigation. How can you reduce the cost to serve these customers in the short term and build in options for the future that can include improved digital services and blended onshore and offshore agents?

What do you think about the gas crisis? Feel free to leave a comment or get in touch via my LinkedIn. Teleperformance works with energy companies all over the world. We are currently working with clients in 83 countries. We also have experience in digital CX from across many different industries, so if you need a partner that can help you to immediately reduce costs and also plan a path into the future then we can help - right now.