13 June 2019
How will consumers engage with the future energy market?
Origin Energy Executive General Manager of Retail Jon Briskin's speech to 2019 Australian Energy Week conference
*CHECK AGAINST DELIVERY
Before I start outlining what I see as the opportunities for customers to engage in a future energy market, I want to take a moment to reflect on where the industry is today, how we got here and what retailers need to focus on to help customers in this future world
It’s no secret that the industry is facing significant headwinds. Customer trust in our sector is low. But interestingly, while trust in the sector as a whole is low, the reputation of individual retailers remains higher than the reputation of the sector overall.
This lower trust for the industry overall is the result of higher prices, complexity and difficulty for customer to compare those prices, as well as unpopular sales practices including door knocking and cold calling.
The political environment has also made sure that energy policy, energy prices and the conduct of energy retailers has been front and centre and constantly in the media.
Energy has traditionally been a low engagement category. Provided the lights came on when they flicked the switch, customers would generally have no need to engage with their energy retailer – outside of when they received a bill.
But higher bills have changed that dynamic. Customers have engaged in increasing volumes looking for better deals with the ACCC stating that more than 84 per cent of customers on market offers and paying lower prices.
One the problems is that the industry has not made it easy for customers to navigate the market. A lack of transparency around pricing and marketing of offers has made it difficult for customers to compare plans and prices – and to have confidence that they are getting a good deal.
Customers have been conditioned to equate a big discount to being good value. But the problem is that these discounts have up until now been set off different base tariffs. Some of the discounts are off usage, some are off the whole bill. There are conditional discounts and non-conditional discounts and different benefit terms.
And in the absence of a standard benchmark across the sector for how retailers promote and advertise our offers – customers have been left to do the work themselves.
For Origin’s part, we have tried to make it easier for customers with dollar estimates of what plans will cost, and in 2017, we launched Savernator that tells customers in a couple of clicks if they can save with Origin and if they could, how much. If they can’t save with us – we tell them that as well.
This level of transparency is integral in building trust. We want confident customers who are happy with their choices.
But with a lack of a consistent approach across the sector, it is easy to see how customers can get frustrated and lose confidence.
Origin has long supported the introduction a reference price across the sector as a way of making it clearer and easier for customers to navigate the market and compare offers between retailers.
By requiring all retailers to promote their offers off a common reference price, the introduction of the Default Marker Offer (DMO) will go some way to making it easier for customers to navigate the market and realise the benefits of competition. We see this as positive and a good way of helping to build customer confidence.
And that is why were the first and so far only retailer to announce last week that we are going the extra effort on 1 July to help make sure that none of our customers pay more than the Default Market Offer.
We are moving more than half a million homes and business across Queensland, New South Wales and South Australia on to lower prices on 1 July. This includes a whole range of customers who are not impacted by the DMO – such as customers on non-discounted plans and time-of-use tariffs
We are doing this because it is the right thing to do and because we want all our customers to be able to easily compare and work out what they are paying compared to the DMO. We hope that other retailers will follow our lead and make sure that no customers pay more than the DMO.
While customers have been conditioned to seek out the biggest discounts to get what they think is the best price and the best value – they have also been turning to solar to help them control their power bills.
Solar is the one and only innovation in the last 10 years that has truly engaged customers positively with energy. As solar costs have come down and energy prices have gone up, customers have increasingly turned to solar as a solution to wrestle control of their energy generation and their bills, all while reducing their personal carbon footprint.
Origin has been installing solar for over 15 years and has installed over 92,000 systems. And we know that customers who purchase solar from us generally have a much more positive experience. The Net Promoter Score for customers who purchase solar from us is +47 compared to an interaction NPS across the business of +21.
This tells us that when we get things right for customers, help provide them with solutions to their energy needs that empower them and give them control, then we have an opportunity to build greater trust.
And building trust with customers will be critical because customers will be at the centre of the future energy market and have more power than ever before
The energy market of the future will be increasingly decentralised, decarbonised and digital.
The future energy market will be more decentralised. With over 2 million solar systems already installed across Australia, households are no longer just consumers of power, they are generators.
They won’t just be buying power from the grid – they will be selling power into the grid or to their neighbours or their retailer. And as the prices of batteries come down, the number of these solar households with batteries will also increase. And the benefit of batteries is that they give customers even greater choice and flexibility about how they consume the energy they generate, as well as how they potentially export their energy to others.
With more and more solar and batteries entering the system, both at a residential and business level – we will also see an energy system that is decarbonising.
But the thing that is going to be central to helping customers realise the benefits of these changes is simple, seamless, digitised customer experiences.
Digital is at the heart of unlocking this potential. And that is why Origin is investing heavily in our digital capability and partnering with tech start-ups to deliver exceptional customer experiences.
By investing in making things simple and easy for customers to engage with us online, we have already seen huge improvements. Things like one click payments on mobile, and removing the amount of steps it takes to sign-up online have removed barriers and made things easier for customers.
Customers self-serving on our digital channels has increased by 170% and our digital sales have increased by 69%. But the most pleasing thing is that our NPS for customers remains high
We are also using digital solutions to make things clearer for customers - using data from customer’s smart meters, we have been providing people with insights about how much different appliances in their home cost to use. We have over 200,000 customers receiving Usage Buster insights and the feedback has been extremely positive.
The more homes that get smart meters, the more customers will be able to benefit from greater transparency over their energy use. This is the power of going from only 4 points of data per year for a customer to over 17,520 points of data per year for each customer. The key is to take this information and make it meaningful and helpful for customers.
Another thing that is related and happening in parallel with the changing energy system is that homes themselves are becoming smarter – with more connected and smart devices. And customers are looking for new ways to make their homes more efficient and reduce their energy costs.
Origin conducted a recent trial with 100 customers across Victoria and Queensland where we provided them with access to technology from a company called Sensibo to make their air conditioner smart.
This technology allows customers to remotely control their air-conditioner via an app on their mobile phone. The convenience is that they can remotely check the temperature in their house, adjust the temperature of their air con, or turn it off or on remotely. It gives them greater control over the cooling of their house – and by extension greater control over their energy bills because we know that heating and cooling contribute about 40 per cent to most homes electricity bills.
We sold these devices to customers at a reduced price – but in return we wanted to test if customers would be open to participating in ‘demand management’ events where they would allow us to turn their air conditioner up by 2 degrees for 2 hours on hot days to help ease pressure on the electricity grid in return for a credit on their bill.
We had over 60 per cent of customers opt into these events - a surprisingly high level of engagement in a low engagement category. What this tells us is that customers are open to energy retailers taking more of a role in helping them manage their home energy if it is simple and easy and there are immediate and clear benefits to them
The point here is that customers are already engaging digitally wanting solutions, and the future is one where these types of solutions will be more common place and easy for customers to take up if they want. But the key points here are that it needs to be simple and the benefits need to be clear and valued by the customer.
This was reinforced by our roll out of Origin HomeHQ - our own foray into the smart connected home market. We partnered with US based start-up People Power to provide customers with a connected smart home kit including a range of smart devices they could install in their home that they could manage and control from the convenience of their mobile device.
The kit contained smart lights, smart plugs and smart door sensors that were all connected via a home’s wifi network. Through an easy to use app, customers could see how much appliances were costing them to run in close to real time. They could control appliances from their mobile device – turning them on or off. And they could program their appliances by setting rules for when and how they turned on and off.
Many customers valued the simplicity and convenience of these items and we managed to sell over 2,000 kits. However the installation rates were very low. This is because the hardware was too intimidating for most people who didn’t have the time or motivation to tackle installing multiple appliances, and instead they put it aside as something to do later. The kit needs to be simple. That’s why Sensibo has been good. It’s one device. Plug it in and it works.
And I will close with one additional example – which is a live one, but illustrates how the digital, decentralised and decarbonised energy market can look and the role that customers will play in it.
Origin is currently undertaking a Virtual Power Plant trial with the support of the Victorian Government. Through this trial, we are aiming to connect over 600 households and businesses using solar, battery and software together to form a 5MW virtual power plant.
We’ll be using cloud-based demand management software to link these systems together and dispatch the power generated back to the grid. The benefit of this is that it will help stabilise and strengthen the network and ultimately this will benefit all customers.
It is a real working example of the role that the customer will play in the future energy market as a generator of renewable power – enabled by digital solutions.
In closing - let me reiterate that customers will be at the centre of the future energy market and will have more power, more control and more visibility than ever before.
The lessons we have learnt tell us that customers must see lower cost, but we need to make it easy for them to access and not make them work hard for it. This new decentralised, decarbonised and digital future presents a great opportunity to do this and engage with customers.
The right regulations and policy settings will also help make it easier for customers – but if we don’t get the settings right, then regulation can add additional cost and complexity for retailers which will ultimately flow through to customers. Regulation needs to work in step with the advancements in digital to allow the whole industry to transform. So we just need to get this balance right as we manage this transition.
With the right regulations and protections in place and by making sure the customer is at the centre of everything we do – we will continue to deliver what customers want – cheaper, cleaner power that they don’t have to work hard for.
Price review outcome and update on FY2021 guidance
Origin Energy Limited (Origin) has provided the following update on earnings guidance for the year ended 30 June 2021 (FY2021), following an adverse outcome on a domestic gas contract price review, combined with a further deterioration in Energy Markets’ operating conditions.