Raising the bar?

Ofgem have recently indicated – and not for the first time – that they will be looking to review the market entry process for new suppliers.

This week we’re taking a closer look at some of the tighter controls that might be introduced, and what that will mean for those looking to enter the market.

Over the last few years, falling commodity prices have acted as a catalyst for increased competition, creating an opportunity for new entrant suppliers – unencumbered by any pre-existing long-term purchasing – to react quickly to the fall in price and offer market reflective tariffs that are cheaper than their bigger, slower rivals.

However, we’ve now started to see energy prices begin to retrace, shifting the pressure back onto new entrants and putting them on Ofgem’s radar. Naturally, Ofgem will therefore be keen to ensure that suppliers entering the market are equipped with the necessary tools and controls to proactively manage their cost base, which is where the heightened scrutiny indicated by Ofgem is likely to be focused.

“Gas shortage to push up bills after ‘perfect storm’ of energy problems” Daily Telegraph, December 12^th 2017

What’s not often called into question though, are the financial controls a supplier has in place to manage not just the wholesale risk, but the industry costs and obligations which make up the other half of a customer’s bill.

Regardless of size or hedging capabilities, oversight and visibility of operational costs is critical to any business, but for energy suppliers this is an inherently difficult task. The data that underpins the industry is kept at an aggregate level, making it difficult for suppliers to break down and understand.

At ENSEK, our energy data reconciliation platform, Libra, addresses this challenge head on. By disentangling the vast industry data set, we’re able to provide suppliers with intelligent insight into their portfolio, with visibility of industry costs right down to meter level.

Libra’s meter level view of costs also supports our supplier’s billing – using this granular view of costs to allow our suppliers to compare the bills they receive from the industry against the bills they send to their customers, minimising financial and operational risk and improving the customer experience.

ENSEK has taken a number of suppliers to market and Libra provides all of our clients with a robust control framework to proactively manage their cost base with an unparalleled level of accuracy.

Developing Libra and the integrated billing and CRM capabilities that are powered by it has meant addressing a fundamental challenge within the energy industry – data – and so ENSEK would welcome a more robust market entry qualification process that ensures that suppliers have the right tools to proactively manage their data from day one and a solid basis to review routinely once they are operating.