Following the recent multi-million pound fines imposed on some of the UK’s biggest energy suppliers, Dominic Smith examines the problems that can arise in managing complex billing system transformations.
If you are one of the millions of businesses or households in the UK that have recently received letters from their energy suppliers announcing price increases, you may have considered switching providers to save money – as consumers are so often exhorted to do. But though the number of providers is supposed to be proof of greater competition in the energy market, it is not always simple for consumers to select the best deal.
According to one price comparison service, there are an estimated 40,000 tariffs within the UK utility market, so it’s not surprising that comparison websites have also proliferated to the point where they almost form a distinct industry.
However, even if you have managed to negotiate the maze of offers and terms and conditions, and can congratulate yourself on having found the best deal on offer, your problems may not be over, because the real difficulties may come with the companies’ billing systems.
A number of the major players in the utilities industry have hit the headlines recently after being caught out with such serious customer service failings that they have now been fined by the UK government’s regulator, Ofgem.
In April, Scottish Power was punished with an £18million fine
, which sounds bad enough, but actually is only the UK’s third-largest penalty. The highest figure was set last December, when npower was ordered to pay an eye-watering £26million fine
. Disgruntled customers may feel a sense of justice from such a punishment, but from a business perspective, it is enough to strike fear into the heart of any CFO – and that figure doesn’t include the payments to enraged customers. In addition to the £18million fine, Scottish Power is said to have paid out a further £48million in compensation directly to its customers.
So what went wrong?
Scottish Power’s problems seem to have arisen when it installed/upgraded to a new billing system – 300,000 customers across the UK received late bills and as a result of this and other errors, UK regulator, Ofgem said that there were more than one million complaints between June 2013 and December 2015.
Ofgem chief executive Dermot Nolan told the BBC in April: "Scottish Power let its customers down during the implementation of a new IT system. When things went wrong, it didn't act quickly enough to fix them. This created frustration and worry for many customers, who also wasted a lot of time trying to contact the supplier by phone.
"The £18m payment sends a strong message to all energy companies about the importance of treating consumers well at all times, including while new systems are put in place."
According to the BBC, Neil Clitheroe, Scottish Power's head of energy retail and generation, admitted to failings: "In order to upgrade our old IT systems, we invested £200m on new technology to allow us to deliver smarter digital products and services to benefit our customers.
"During the complex transition between systems we encountered a range of technical issues. This led to an unacceptable increase in complaints and reduced the quality of our customer service.”
Mr Clitheroe did however promise to make amends when he said: "I gave a guarantee that no customer would be left out of pocket by these issues and we continue to compensate customers who have been affected."
At npower, the energy giant’s fine was even greater because its offences were compounded by poor customer service, although again, according to Ofgem, many of npower's problems occurred after a new IT system was introduced in 2011. Among other difficulties, it too apparently led to the company failing to send customers bills for over a year, many of which were inaccurate anyway. It seems that matters were made even worse, because the system couldn’t handle the complaints properly, so unresolved issues were recorded as resolved, and multiple records created for one complaint – a sure way to exacerbate a poor relationship.
Of course we don’t know the exact details of what Scottish Power and npower were attempting to do when they changed over to a ‘new computer system’, however such transformation projects require a huge amount of expertise and planning to ensure risks are managed and that data is mapped correctly to the new system.
Computers are fundamentally good at adding things up. That’s what they do. But if the data that goes in is incomplete, inaccurate or just plain wrong, then it really shouldn’t be a surprise when the new system produces undesirable results. Data quality is therefore absolutely critical when migrating from one system to another. (Scott Lowe’s blog on Tech Republic
is well worth a read, describing how one such project “spiralled out of control” based on data quality issues.)
No doubt that utility tariff complexity has also been a part of the problem. “Tariffs are often overly complex and seem designed to confuse.” Asserted the former government watchdog Consumer Focus
in its examination of the UK energy industry. With the aforementioned 40,000 different types in the UK, it’s hard to disagree, especially if ThisIsMoney
is correct, and for example, “A single dual-fuel tariff can include as many as ten different unit prices for gas and electricity as well as dozens of variations relating to region, guaranteed or fixed rates and periods, penalties, standing charges, and sundry discounts according to how accounts are operated – such as paper billing versus emails.”
Nevertheless, one of the biggest mistakes we see is when service providers try to replicate what their old system did in their new system, rather than taking the opportunity to simplify their offerings or improve their business processes. And you have to wonder why change if all they want is the new system to do exactly what the old one did?
The benefits are worth striving for
A recent study by Quindi Research, New Directions in Energy Retail: Billing & CIS for Competitive Edge
found that “70% of energy retailers see their billing and customer care solutions as key enablers in their business strategy”. And of course, the aims to cut costs, improve efficiency and customers’ experience and to enhance a company’s ability to innovate and respond to demand all make good business sense, but the size of the possible gain is mirrored by the scale of the risks.
However, in a fast moving and highly competitive market, being stuck with legacy systems and inefficient processes means that many businesses simply have no choice but to take on this transformation.
As PwC says in its Communications Review, BSS transformations: Five ways to drive success
: “Communication service providers (CSPs) worldwide are replacing their ageing business support systems by migrating to state-of-the-art platforms. [As they] face continuing, profound change in all their services, their customers’ behaviour and their business models, they’re finding that BSS platforms designed for the old world often are no longer fit for current purposes. In many cases, an affordable programme to transform their BSS is the only viable option.”
At Cerillion, we have a proven methodology for managing transformation projects built on more than 20 years’ experience delivering BSS/OSS solutions around the world
. This experience has also shaped the way that we have developed our products to support the complex needs of customers in the utilities, telecoms, finance and other industry verticals, with both on-premise enterprise deliveries and SaaS delivery models.
However, no matter what solution you choose, it is vital to remember that whether a business is large or small, relatively simple or intricately complex, the customer relationship is paramount, and it seems, those who neglect it, pay a high price.