We look at why the seemingly simple DD payments process can create complex issues, and what suppliers can do to regain control and to keep their customers happy.
Energy plays an important role in all of our lives, but the awareness the average energy consumer has of how much they use and spend remains low. Ask yourself a few simple questions as you read this – how much energy does your household use each month? Not sure? OK, how much do you pay for your gas and electricity each month? That one should be easier, as for many the monthly charge on their bank statement is the only real reminder that somebody is supplying energy to their home. The fact that this monthly figure is often treated as gospel when providing a quote to a new customer carries some inherent risk for both the consumer and supplier.
As is evident by the recent study carried out by uSwitch, the monthly Direct Debit a customer pays rarely has an accurate correlation to the amount of energy a customer is using. What’s more, this problem is one of the elephants in the room of the industry, with few suppliers able to take positive action to get to the root cause and fix it. This can result in the customer either under or overpaying for their energy by some margin – scale this up to a supplier’s entire DD portfolio, and you can start to see where the £1.5bn has come from.
Even if the view of monthly spend agreed at the point of quotation is correct, then having the mechanism to effectively monitor, review and ultimately change the monthly Direct Debt payment in a controlled and systematic way is a key capability within an energy supplier. Seasonality is an obvious factor that affects consumption, with cold or warm weather naturally influencing our energy usage. A static monthly payment should be calculated to factor in this seasonality, ensuring that the annual cost is spread evenly over the year.
For many suppliers, evaluating the consumption of a property and intelligently updating the payment method to cover the consumption, regardless of fluctuations in usage that the weather or other factors may throw out, is a challenge. At £1.5bn, it’s clearly not a small challenge either.
With record numbers of customers switching, there is the potential for this problem to be compounded further, with increasing volumes of customers moving supplier and taking with them a skewed view of their consumption. If the monthly DD payment to their previous supplier is the most consistent basis for quoting a customer, then the importance of accurately evaluating that figure on an ongoing basis is paramount.
Linking the consumption of energy at a household to the amount a customer is paying each month is a powerful tool, and is something we are working with energy suppliers and partners to improve. By evaluating the balance of a customer account against their monthly DD payment and their consumption, we can form a view on how much of any excess credit balance could be returned to the customer without impacting their ability to cover their usage.
Interested? Get in touch.