Energy price caps may be hogging the headlines but a new challenger in the UK household power supply market is taking a different approach to lowering prices: changing the way customers engage with their bills.
Powershop, an app-based retail energy supplier founded in New Zealand in 2009, entered the UK market through a partnership with Big Six utility Npower. The latter started rolling out what it called Britain’s first fully digital supplier this year.
Instead of promoting a cheaper tariff, Powershop champions flexibility and control by targeting mobile-savvy consumers who are willing to change their own habits to reduce their electricity prices.
“Our industry does an amazing job of making intelligent people feel stupid,” says founder Ari Sargent, an energy industry veteran who set up his business to make the experience of buying power simpler for consumers.
Sargent likes to view energy as any other consumer product, and he even considered putting it on the shelf in stores. Instead, he built a digital company, which now operates in New Zealand, Australia and the UK, selling so-called “power packs”, or bundles of electricity, and plans are in place to start offering dual fuel as well. Consumers can choose from various shapes and sizes on the website or app based on what they need rather than an estimate of what they might use.
By updating the app with meter reads, with or without a smart meter, consumers can check in on their energy habits and see when and where they use the most power.
“Customers get very rich information that’s simple and easy to understand and the flexibility to buy as much power as they want when they want,” he said. “When you see in detail how much it costs to consume electricity in different parts of the day, you might be incentivised to turn your switch off,” he says.
Sargent describes it as the Weight Watchers effect: the more you write down what you eat, the less you eat.
The same visualisation technique works with energy, he says. “Power packs are another way of communicating with customers,
The more people engage with their electricity, the more in control they are.”
Alex Harrison, senior associate at law firm Hogan Lovells, said Powershop’s structure is linked to a broader change in the market towards smart metering. Most homes will have a smart meter by 2020, and once they’re in place, new entrants and existing players will be able to offer demand-sensitive tariffs more easily, he says.
Sargent adds: “All consumers need to know is how much they’re spending and how long it will last. The underlying philosophy is that our job is to give power to the people.”
Despite his efforts and the drive towards metering, the government seems determined to bring in price caps for energy companies with a pledge expected in the upcoming election manifesto.
The UK’s energy companies have long been accused of unjustified price hikes by the government and industry regulator.
However, the Conservative party’s plans to offer voters a new cap on increases to energy prices came under fire by energy bosses and consumer groups alike who argued that such a cap would be ineffective or even leave consumers worse off.