Adrian Rann advises Utilita for Hampshire Business
Utilita – tackling fuel poverty through intelligent energy supply
The UK energy market can perhaps be best defined as volatile. Energy prices can increase dramatically and quickly, pushing ever larger numbers of households into fuel poverty.
Perversely it has always been that those on the lowest incomes - households using pay-as-you-go energy suppliers - which have traditionally paid the highest prices for their heating and lighting.
Winchester energy company Utilita has built a successful and rapidly growing business that provides some of the cheapest electricity and gas on the market to the poorest households in the UK. The company’s 25,000 customers rely on Utilita’s innovative approach for their electricity and gas and the company is adding 500 new customers each and every week.
“Twenty per cent of all UK households have their energy supplied on a pay-as-you-go basis,” says Bill Bullen, managing director and founder of Utilita, “and we expect this to increase to between 30 and 40 per cent over the next decade. It is clear to us that the current model of energy supply simply does not serve a large part of the market well.”
The energy supply market is fiercely competitive, and it is Utilita’s innovative approach that is driving its growth. Its smart meters, developed in conjunction with Secure Meters, keep Utilita’s customers up-to-date with energy usage allowing them to identify areas where they can reduce energy consumption, and automatically alert them by text message when credit is running low. Customers can top up their energy meters by phone, text message or through pay points.
Smart metering of energy use in homes and in the workplace is very much at the front of the government’s efforts to reduce CO2 emissions, so it is surprising that Utilita receives little in the way of support from any quarter.
Bill says: “We have shown consistently that we can deliver cheaper energy and reduce energy consumption. Government really must work with private sector companies if it is serious about reducing fuel poverty and CO2 emissions.”
The biggest challenge however facing Utilita is one that many small and medium sized businesses face – funding growth.
“Utilita is a fast growing business – each customer spends on average £1,000 a year with us and we are adding 500 new customers a week,” says Bill. “Funding this kind of expansion is difficult, particularly when the banks do not seem interested or able to help.
However, the future for Utilita and its customers is anything but bleak. The majority of its customers are currently in the Portsmouth and Southampton areas, but Utilita has a growing market in the North West and is currently conducting a number of trials with social housing providers in South East London.
“The energy market is hugely competitive and we are always looking to keep one step ahead of the competition,” says Bill. “We are on track for up to 2,000 new customers a week as reduced energy consumption and bills is an attractive and compelling message in today’s market.”For more information on Utilita visit www.utilita.co.uk.
James Cowper’s Adrian Rann says...
Utilita has a growing business and needs to be able to finance the cost of expanding their customer base.
As it buys electricity and gas on the wholesale market it is not a business that has assets which it can readily secure borrowing against. It is therefore difficult in this current economic climate to borrow money from the banks to fund the growth. The customer base of individuals predominantly on pre-paid contracts also means it is not possible to use methods such as debt factoring for funding growth.
Utilita is purchasing smart meters from Secure Meters, a manufacturer of the latest technology in this area. This is a good example of how cooperation between industry partners can be a way of providing market growth for both parties.
As with all growing businesses it has been important for Utilita to concentrate on producing robust management information to monitor both its current income and expenditure and to model how changes in its growing customer base and the volatile supply prices of electricity and gas will affect future funding requirements.
Adrian Rann is a partner at James Cowper. He can be reached by email: arann@jamescowper.co.uk.