COMMERCIAL FEATURE A “Customer First” Take on Vertical Integration Because of a vertically integrated structure we have been able to optimise the design of our products and business processes to meet consumer needs in the most cost effective manner. This includes everything from stock control, through installation and on-going customer service. We believe that this has enabled us to create and sustain a competitive advantage in the supply market and at the same time ensured that we have the most cost effective solutions for other utility customers. Utilita, the pre-paid gas and electricity supplier, and Secure Meters subsidiary, is using its smart metering technology to bring down the cost of energy for low income households in the Great Britain (GB) market. Launched in 2008, Utilita has maintained a price point lower than the cheapest of the Big 6 GB suppliers (BG, SSE, RWE, EON, EdF and Iberdrola), demonstrating through innovation how prices can be reduced whilst at the same time offering an improved service. Utilita now has 70,000 consumers on supply and is having a direct impact on reducing fuel poverty (in GB, fuel poverty is defined as being those consumers that are spending more than 10% of their income on energy). Now that the uncertainty in the government mandated smart meter project has been reduced, Utilita is accelerating its growth, and over the next few years, it hopes to become a major player in that market; the first organisation to build a vertically integrated operation that puts the consumer first. Since it first applied its technology to the pre-payment market in the UK over 10 years ago, Secure has increasingly recognised the potential for reducing costs and radically improving service in this important sector of the market. Being a customer focused operation, Secure has sought new ways to exploit the technology and this has culminated in the formation of a vertically integrated business that starts with the consumer and goes back up the supply chain. In GB, the pre-payment market accounts for over 4 million households, and therefore represents a significant market in its own right. Furthermore, this market is growing and is expected to continue to grow as energy prices rise. However, the main reason why the sector will grow is because of consumer demand. By improving the convenience of vending and cutting prices, pre-payment services based on smart meter technology will become a far more attractive option for consumers. In Northern Ireland the sector has grown from around 80,000 customers prior to the deployment of Secure’s smart pre-payment meters, to more than four times that number – purely because consumers exercised the right to choose how they paid for their use of electricity. Pre-payment electricity metering now represents over 30% of consumers in Northern Ireland. At Secure we believe that consumers and utilities all over the world will recognise the advantages of deploying smart pre-payment solutions. With the experience we have gained in N. Ireland and GB and the belief that the system will be of interest outside these territories, we have ensured that our product design is sufficiently flexible and can be deployed in any geography. “The utility is assured payment for energy consumed” Smart pre-payment takes away the inconvenience of having to charge a physical token (by the consumer) as well as the additional cost of maintaining a dedicated vending network (by the utility). With Secure’s smart meters, consumers can vend remotely, by phone, SMS or online, with the credit sent to the meter over the mobile phone network. By building technology around existing standards we have both maximised performance as well as the ease with which it can be integrated into the business systems of any utility company. The meters can also be programmed not to disconnect during the night, at weekends, on a public holiday, or any other day the supplier may choose (even after the company Christmas party!). This is not only a major benefit for the consumer but it is also a benefit to the supplier because it reduces the cost of having to service the meters outside of normal business hours. Customers value comfort and convenience. The option of vending via SMS rather than walking down to the local store to top-up using a key during the winter is far preferable. Furthermore a significant, and disproportionate number, of Utilita’s customers are defined as having special needs. This may be due to old age, young children, or because of a disability or illness. Vending at traditional outlets for this group may present particular difficulties, and consequently the value they place on being able to vend remotely is high. These are the main reasons why they choose Utilita above the service provided by other suppliers. Price is important, but in itself not sufficient to provoke a customer to switch supplier. It is not just in the current pre-payment market where smart meters will deliver a more cost effective solution. In many residential properties, and indeed for small businesses, the benefits of smart metering are being increasingly recognised. For example, in both the private rented and social housing sectors where bad debt, or the potential for bad debt to arise, is a serious 68 METERING INTERNATIONAL ISSUE - 4 | 2013