“We delight in the beauty of the butterfly, but rarely admit the changes it has gone through to achieve that beauty”. This Maya Angelou quote lays out a simple truth: there is always a journey to achieve a beautiful end, and it is not always an easy one.
The Smart Metering Implementation programme is one such journey. To date, suppliers have been closely monitoring cost, regularly refreshing their understanding of the different elements as a result of the changing landscape and in response to lessons learned from the foundation phase. However, there are still some significant cost challenges ahead:
- Cost per install: As install volumes reach peak levels, suppliers will need to optimise the end-to-end journey, to ensure every install is completed at an optimal cost. This means shifting to cheaper and more efficient contact channels to generate the necessary customer demand, focusing on the performance management of the field force and the commercial arrangements with Meter Operator agreements (MOPs) and Meter Asset Providers (MAPs)
- Managing legacy work: With smart meter installations forming the vast majority of work, and a growing proportion of the asset portfolio, suppliers will also need to place greater emphasis on the exit of legacy contracts and the return of legacy assets. Not to mention, ensuring legacy work is kept to a minimum to avoid unnecessary cost
- Investing in new operating capabilities: For example, new industry data flows and remote meter management capabilities (events, alerts, alarms etc.) could add significant cost and lead to missed benefits if not automated and properly integrated. When you also consider the amount of future change still to come (look out for a future blog on this topic!) you can see how difficult it is to plan future costs.
The true metamorphosis though comes when suppliers put as much or even more effort into delivering the expected benefits and actively seek out new opportunities. The beauty of the butterfly comes when suppliers are able to realise the benefits and maximise their return on investment. For example:
- Reducing cost-to-serve: The growing portfolio of smart meters provides an opportunity to reduce cost-to-serve, through identifying, baselining and tracking the correct operational metrics. These include:
- Tracking the reduction in site visits, call volumes and back-office activities
- Actively managing down the level of debt as we move away from estimated reads
- Proactively managing expectations. When suppliers get the end-to-end journey right, the customer transition to Smart will be seamless and they won’t feel the need to call
Leveraging new opportunities: Suppliers also have the opportunity to re-shape the energy industry by designing new propositions to realise additional value. Whether they be tailored products or tariffs, or bundled energy services. Once a critical mass of smart meters has been reached, there is the opportunity to adopt entirely new market models under smart grid arrangements, opening up additional potential value.
Charles Darwin famously said: “It is not the strongest of the species that survive, not the most intelligent, but the one most responsive to change.” Things have changed since the original business case was set out. The key to success is adapting to that change and incorporating the learnings as we go along. The energy suppliers who will ultimately succeed and deliver on their original business case, will be those who not only control the costs but also deliver the forecasted benefits and find opportunities to drive additional value.