Regs and tech put CEOs under pressure – but customer services also needs attention, say reports

Utility Week research shows regulatory uncertainties and the challenges of new technology have the biggest impact on business performance.  However, Citizens Advice figures show there is work to be done by energy suppliers in caring for their customers.

According to the first Utility Week CEO Insight Report utilities CEOs claim regulation and policy instability (7.9 and 7.5 out of 10 respectively) were the most significant factors affecting their businesses, with new technology and commercial models not far behind (7.2).

Rosy outlook on RIIO

However, when the focus turned to the question of regulations being ‘fit for purpose’, the energy sector was more optimistic.  While 57% of CEOs overall had little or no confidence in the regulatory frameworks in which their businesses operated, the vast majority (83%) of network CEOs agreed that the RIIO regime had “positively changed the way we do business”, with the remainder neutral, rather than negative, towards the statement. 

In addition, half of the network CEOs agreed that regulatory settlements for transmission and distribution networks should be aligned, although almost 67% felt that investors would not be willing to accept a lower rate of return under the price settlement.   

Change is inevitable

When it comes to the transformation of energy business models, CEOs agreed that change was inevitable. While utilities CEOs in general put the level of change within the next five years at 6.7 out of 10, those heading up integrated energy companies and power networks anticipated a total transformation in their business models over the next 15 years. 

Commentators on the findings stated that the attitude to change was unsurprising, given the drive towards decentralisation, decarbonisation and digitisation – all of which has not only led to disruption of traditional operational models, but a need to embrace new technologies.

The customer conundrum

Those leading the utilities sectors were generally pessimistic about customer perceptions of the industry, with 62% of those questioned believing customer’s views of utilities were becoming more negative.  The report debated the difference between customer perception and operational reality – highlighting that most DNOs are now being rewarded for outperformance and ranking as top performers in the UK Customer Satisfaction Index.

However, latest figures from the Citizens Advice Bureau would suggest that there is still some way to go in delivering the service customers expect – particularly for the new ‘challenger’ suppliers, some of whom recorded between a 1.2 and 1.9 star rating out of five.   That said, the likes of So, Bulb and Octopus Energy ranked top of the table ahead of national suppliers such as British Gas and SSE.

While recognising the positives, the charity stated: “Ofgem also has an important duty in protecting customers from companies which don’t provide appropriate levels of customer service. The regulator must now take action and tighten the rules for new companies becoming suppliers.

The Citizens Advice findings are only likely to add further pressure to energy CEOs already facing regulatory and technical change across their organisations.