Operational Challenges Facing the Energy Sector

The energy sector is facing a number of challenges as a result of the cost of living crisis, geopolitical issues and restricted consequences for customers who fail to pay their bills. These challenges are often at the forefront of the minds of those working in this sector, and for good reason, however day-to-day operational challenges must not be overlooked. 

From billing errors and bad debt to operating model and process improvements, operational inefficiencies can significantly impact revenue and brand if not addressed with the correct measures. 

In this article, we’ll cover the main operational challenges faced by energy companies and how they can tackle them effectively.

Operational challenges for energy companies

There are a number of operational challenges for energy suppliers to deal with. Here are the main ones and how to overcome them:

Billing errors

Accurately maintaining up-to-date customer data poses a significant challenge for energy companies, often resulting in billing errors and poor collection rates. These issues not only drive up business costs but also hinder operational efficiency and customer satisfaction.

Billing customers sounds like a simple task, however it only takes one small mistake in your data to prevent successful and accurate billing. 40% of utilities bill payers in the UK we surveyed had experienced issues after moving energy suppliers, with 54% related to billing.

Bad data can result in a customer being overbilled or underbilled, the latter of which could ause considerable losses if the issue extends across many accounts and/or for an extended period of time. Overcharging customers is one of the easiest ways to damage your reputation and lose customers’ trust.

To overcome data issues, our data cleansing solutions help ensure your data is accurate so customers are charged for the energy they have used, reducing billing errors, delayed payments and lost revenue.

Identifying bill payers

Finding the responsible bill payer for a property is not always easy. If a bill is unnamed, they will often be ignored as the occupier is less likely to pay if their name is not actually on the bill. In addition to lost revenues, there is also an increase in operational costs and the potential for reputational damage due to incomplete or inaccurate customer data.

The challenge for energy companies is to find out who the bill payer is and our Occupier ID solution can help to quickly identify the occupier of an address so you can update your records and get in touch with them. This saves you valuable time sending unnamed bills and trying to track down the occupier yourself.

Our Property Moves solution can determine if the named bill payer still occupies the supply address. If they don’t, we’ll be able to work out when they moved and who the bill payer is now.

Reduced acquisition rates

Acquisition efforts are also heavily impacted by poor data. If contact details like emails or phone numbers are wrong, your sales team is wasting time and resources chasing incorrect leads. Getting a prospect to convert can be challenging enough, so at the very least you need these details to be correct so you can speak to the right person and give yourself a fighting chance of landing a sale.

Our market leading data cleansing solutions ensure your customer and prospect data is accurate, up-to-date and fully compliant. This gives you confidence that the data is accurate for all your prospects to help improve your rate of acquisition and marketing performance.

Incorrect customer segmentation

Another problem is customers being incorrectly segmented resulting in tariff and payment inaccuracies. If customers are on the wrong tariff, there is a chance they are underpaying for the energy they’re using. Our revenue assurance solutions can identify revenue leakage helping pinpoint customers who are on the wrong tariff (or any payment inaccuracies).

Our data segmentation solutions can help you correctly segment your customers to ensure that they are placed on the right tariff for accurate billing. This will also improve your marketing efforts allowing you to send more targeted campaigns tailored to the right audience which can help increase your conversion rate and ROI.

Organisations often find that certain customer journeys lead to bad debt, highlighting the importance of proactive risk management strategies. While retrospective actions are necessary to address existing issues, they are not as effective as pre-emptive measures implemented right from the beginning of the customer acquisition journey. Our risk based segmentation capabilities generate risk profiles enabling energy companies to better understand the risk of each customer, tailor their treatment and communications and to manage bad debt more effectively.

Growing final debt

One of the biggest risks for energy companies is not receiving payments from customers which can impact the financial health of the business.

We offer a credit risk management service that can be used at any point of the customer lifecycle, whether it’s from the start of the customer's journey, in life management, or at the billing and collections stage.

By doing this, businesses can tailor their approach to each customer based on the level of credit risk they pose. This helps increase collection rates, and ultimately minimise bad debt.

Poor collection rates can result in energy companies seeing high levels of debt that can spiral out of control. Currently, debt in the energy sector has reached a record high of almost £3 billion. It’s important that energy companies try to recoup as much of this as possible.

Our collections improvement solutions help energy companies address poor collections rates. We’re able to optimise your strategies to increase collections performance, minimising bad debt and increasing your cash flow.

Conclusion

There are a number of operational challenges for energy companies to deal with which can severely impact revenue. It’s important that these are dealt with quickly and effectively to minimise the damage they can cause. As a leading data insights consultancy, we offer a variety of solutions to help businesses in the energy sector improve the accuracy of data, reduce risk, increase rate of collections and grow revenue. Get in touch with our team to see how we can help you improve your operational efficiency.

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