The Utility Warehouse: helping npower manage retail market reform

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21 November 2013, Gas, Electricity

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In 2006 Telecom Plus, owner of The Utility Warehouse, sold its energy subsidiaries Gas Plus Supply Ltd and Electricity Supply Ltd to npower. However, customers on the Electricity Plus and Gas Plus tariffs may not have been aware that Telecom Plus continued to manage all aspects of the energy customer relationship for these companies on behalf of npower, including billing, customer service, and metering. In a recently announced deal Telecom Plus has now purchased these subsidiaries back under The Utility Warehouse, but npower retains the contract to supply electricity and gas for the next 20 years.

So in reality, for the hundreds of thousands of affected customers, all that will have changed is that they will now be fully aware that Telecoms Plus is their formal supplier and is handling all their account management functions.

While greater clarity for the energy consumer is always a good thing, what about the wider market: is npower really acting to make the industry fairer for all by promoting competition? Actually, the key driver for the deal is more likely to be the forthcoming regulation as a result of Ofgem's Retail Market Review, which will limit suppliers to four tariffs per fuel in the interests of reducing confusion when energy customers compare offers.

As The Utility Warehouse already manages the customers on the electricity and gas "plus" tariffs on behalf of npower, the sale will allow the two companies to continue offering their customers the same tariffs under their respective brands with little administrative effort. If the customers stayed under npower's brand, it would mean migrating these customers onto different, potentially lower-margin tariffs. This would result in high administrative costs at a time when npower is already blaming a new computer system for its low domestic customer satisfaction ratings.

Finally, The Utility Warehouse would not gain any particular advantage in challenging the Big Six, as the energy supply still originates from npower. The deal does not improve the ability of The Utility Warehouse to compete on the wholesale market like the Big Six, perhaps by procuring energy in a different way to undercut its rivals. Instead the supplier will focus its competitive strategy on optimizing its marketing efforts, overheads, bundled offers, and targeted sales, including the recruitment of customers as sales agents. However, time will tell whether bundling will fall afoul of Ofgem's drive to create transparency and simplicity across the energy retail market.

www.datamonitorenergy.com / asken@datamonitor.com / @DatamonitorEN

Source: MarketLine

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