Opus Energy's Managing Director Talks to Utility Week

10.06.2009

Consumers just want energy suppliers to get the basics right

Opus Energy managing director Charlie Crossley Cooke tells Janet Wood that success is a matter of getting the basics right - accuracy and price.

Charlie Crossley Cooke says companies want just three things from their energy supplier. Number one is a good price. The other two are flexibility and an accurate bill - and that, he says, is why his company is adding 10,000 sites a year to its customer base.

"It seems amazing that the two things people are asking for - flexibility and to get an accurate bill - are obvious, yet energy supply companies have continually failed on it," he says.

Accurate billing has always been a problem for energy companies, and he says it has to be smart meters that solve the problem. "In fairness, if you don't have a smart meter and you have a large number of sites, if you are sending out people to read meters, you are going to end up with errors and with estimated bills," he says.

Crossley Cooke is the managing director of Opus Energy, and he thinks the company's Evolution product offers customers the flexibility they need to balance the "huge amount of risk" of a contract renewal. He says the traditional renewal is a lottery. "The old-fashioned way of locking in your contract once every year or two years - at that point the company is taking a lot of risk because you don't know what the price will be," he says. Evolution allows companies to lock part or all of their contract at any time.

He explains: "Different customers have different strategies. For some, it's an averaging process across the period. Others use it to the extreme and will buy in small granularity. Some will just choose the time they think is right and lock out the whole period."

Control

He adds: "Once someone has offered you that control, why would you not take it up?" As the recession bites, Crossley Cooke acknowledges that trading conditions have deteriorated. Company failures have increased, and for their part, customers report that it is more difficult to get favourable terms from energy suppliers.

Crossley Cooke says Opus has not changed its approach, but it is stricter now. "We have always taken a very active view in understanding the credit risk of different types of customers," he says. "We haven't changed that greatly. We will reject more customers than we did a couple of years ago - a few per cent more customers will fail credit checks. We have had a tightening of our criteria and there has been a worsening on credit."

For the larger corporate customers he says: "We will only take those customers that are able to get credit insurance. And that has significantly deteriorated, especially in some sectors. Clearly, there are customer areas which are worse affected, for example parts of the high street. Also highly leveraged companies owned by private equity groups are given a pretty severe credit rating due to the amount of debt they carry as companies."

He says energy companies cannot be flexible on credit insurance "otherwise the energy company is effectively supplying credit. If your bank won't supply you with credit, I'm not sure you should rely on your electricity company to".

Pay upfront

He says that in the current landscape: "I would expect to see more customers having to provide deposits or to pay upfront for their electricity. It's not a prospect we want to see, but it's the reality today."

Despite the tough trading conditions, he says there are "plenty of customers for us out there" and the company will continue to grow. How big the market will be, and whether he will have competition from new entrants, he says is in the hands of regulator Ofgem.

"We are still very interested to see what Ofgem has to suggest with regard to the supply probe. The big outstanding issue is liquidity in the supply market. It's a complex matter, that's why it has taken a long time. But it is very important if you want to have genuine competition. If you want independent suppliers to be able to thrive, you have got to have liquidity."

He adds: "There are lots of suggestions for how to get people to enter the market, which is all well and good, but if they enter the market and they can't buy power to supply, you end up with the only suppliers being the ones with generation. The only way to enter the supply market would be to buy generation, and clearly that would severely hamper competition."

His suggestion is to use auctions, requiring all generators to put up for sale a certain amount of their load to increase liquidity. He realises he is asking for a significant change. "It is radical change in the market, and that's part of the difficulty. It is a complex issue and it needs brave steps from Ofgem," he says.

Nevertheless, he says a step of this type is vital if competition is to truly come into the market and challenge the big six. What is more, he says now is the time to do it. "The EDF/British Energy deal has clearly reduced liquidity in the market," he says. "If you want the conditions for independent energy companies to flourish, it has to be done."

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