PA Consulting’s Ted Hopcroft, energy and utility expert, discusses the possibility of council-backed energy suppliers, and what impact coronavirus could have on them. The article discusses the future viability of such supplier business models and whether local authorities would be better adopting a white label model.
In short, Ted believes council-backed retailers have the added pressure of attracting more financially vulnerable customers and are therefore already at a disadvantage.
Ted goes on to say: “Both Bristol and Robin Hood have done positive things around helping vulnerable customers, such as those on pre-payment meters (PPM). However, the customers who are most attracted to your brands are probably your least profitable customers. It’s probably going to take more time and effort to service those customers, so there’s a real challenge for the council and what they’d like to achieve against whether they are going to actually make any money out of it.”
The article continues to explore COVID-19’s impact. Commenting on this, Ted says that over the past two months, the financial pressures of coronavirus on the UK economy have caused more people to fall into the “vulnerable customer” bracket than would have otherwise. Some estimates have English local authorities taking a £5 billion hit in total thanks to the virus. While no supplier is immune to the financial implications, Ted predicts the virus will hit council-backed suppliers even harder.
“You would expect it would increase the risk on small suppliers because, particularly with a council-backed supplier, if they have got more vulnerable customers, more pre-payment meter customers, then they may be more likely to be facing debt shortfalls and trying to sustain their customer base through a very difficult time.”
Ted adds: “Energy retail is not an easy business and I think if you look at the struggles that those two companies have had, that brings that out in terms of viability. You need a strong brand to get out there and get through. If you are branding locally to maximise your potential locally then you are automatically inhibiting yourself on more nationwide issues. You need critical mass and then you need to build up from that.”