Third Party Intermediaries in the Business and Industrial Energy Supply Markets Prospectus

Transcription

1 Date: September 2015 Third Party Intermediaries in the Business and Industrial Energy Supply Markets Prospectus GRAPHIC/ LOGO

2 About Cornwall Energy Cornwall Energy s team of independent specialists have experience of liberalised energy markets and their regulation since their inception in Great Britain and elsewhere in the late 1980s. We provide consultancy, intelligence and training, and are a trusted and reliable partner whether you are a new entrant or a large, established player. Specific areas of our expertise include: wholesale and retail energy market competition and change; regulation and public policy within both electricity and gas markets; electricity and gas market design, governance and business processes; and market entry. 2 Millennium Plain Bethel Street Norwich NR2 1TF T +44 (0) F +44 (0) E info@cornwallenergy.com W Disclaimer While Cornwall Energy considers the information and opinions given in this report and all other documentation are sound, all parties must rely upon their own skill and judgement when making use of it. Cornwall Energy will not assume any liability to anyone for any loss or damage arising out of the provision of this report howsoever caused. The report makes use of information gathered from a variety of sources in the public domain and from confidential research that has not been subject to independent verification. No representation or warranty is given by Cornwall Energy as to the accuracy or completeness of the information contained in this report. Cornwall Energy makes no warranties, whether express, implied, or statutory regarding or relating to the contents of this report and specifically disclaims all implied warranties, including, but not limited to, the implied warranties of merchantable quality and fitness for a particular purpose. Numbers may not add up due to rounding. 2 P a g e

3 Third Party Intermediaries in the Business and Industrial Energy Supply Markets has become the reference point for the sector since it was successfully launched in April 2013 with suppliers, Third Party Intermediaries (TPIs) and investors all benefiting from the service. Since the launch major enhancements to the service have included: market shares by contracts index for small medium enterprises (SME) and volume index for industrial and commercial (I&C); an increase in the coverage of TPIs from 209 in the Q115 update, to 212 in the 2015 main report; and the provision of more information on TPIs individual services. Cornwall Energy SME & I&C TPI Index trends What does the service do? The service is the result of several years research into the I&C and SME energy supply markets in general and TPIs in particular. It is intended to represent as fully as possible the very important role TPIs play by: scaling the 250mn a year fee opportunities open to them from striking gas and electricity contracts for business and the public sector; evaluating exactly how three quarters of I&C and a fifth of SME energy contracts reach suppliers via TPIs; describing how the sector has grown through consolidation and many more diversifying out of energy contracts in to negotiating deals for other products and helping their customers manage their energy consumption and accounting. TPIs who just broker energy contracts are the exception rather than the rule; setting out the challenge they, consumers and suppliers face from specific regulation of energy brokerage; and suggesting some ways in which the market for brokerage might develop, especially as some of the major suppliers look to muscle in on the energy services market. Service overview The service explains how TPIs, also known as brokers, operate in the business and industrial energy supply markets. It analyses how they compete for customers, and how they engage with suppliers. Updated quarterly, the profiles also address wider challenges for TPIs, such as consolidation and regulation. For further information regarding the service, please contact Robert Buckley on or robert.buckley@cornwallenergy.com, or Colin Magee on or colin.magee@cornwallenergy.com. 3 P a g e

4 Methodology The structure of the report is as follows: Energy market segmentation sizes the market for non-domestic gas and electricity supply contracts and segments it by SME, private sector I&C and public sector SME TPI Index consumers. It also comments briefly on the structures of supply contracts as they have influence on how TPIs provide their services; TPI presence estimates the proportions of contracts and energy volumes they negotiate versus those entered into by customers direct, differentiated by sector. The energy volume assessments provide an input to estimates of a total revenue pool available from non-domestic gas and electricity brokerage; Business models and services describes the different types of organisation providing energy brokerage and the services they offer beyond negotiating energy contracts; Representation and regulation summarises the development of the TPI sector and the work to raise standards through representation, codes of practice and specific regulation; and Current challenges reviews topical issues in the TPI market; the race for scale as TPIs are brought and merges, and routes to market, which considers TPIs relationships with energy suppliers and product and service developments. It also gives our perspective of the challenges facing TPIs. The Cornwall Energy team has significant experience of the non-domestic energy supply markets including the TPI sector, which we have actively developed to support our existing market intelligence services. We have supplemented this knowledge base for this analysis by: researching TPI company structure and financial information from media and press statements and Companies House; adding this information to existing knowledge to create a headline market segmentation by energy volumes purchased and services offered; confidentially discussing our views on sector trends with informed contracts in the industry and developing our thoughts on potential developments in the sector; deriving a unique methodology for the Cornwall Energy TPI Indexes that assess the scale of the larger TPIs in the SME and I&C markets; and assimilating this information and developing the implications for TPIs, consumers and suppliers. Outputs This is an annual report available on a subscription service and will be updated by the end of June. Cornwall Energy will also provide quarterly updates and periodic alerts on developments as they arise. These will be made available according to Cornwall Energy s terms and conditions. As a subscriber, you will receive: an annual report detailing overall market segmentation and commentary; one-page summaries profiling the 200 plus leading energy TPIs; and quarterly updates on the changes and challenges affecting the sector, published by the end of November, February, and May. 4 P a g e

5 Pricing Standard Small TPI discount One-off report 3,000 1,500 Annual subscription (report, three quarterly updates, plus new alerts) 5,000 2,500 *Small TPIs have an index of less than 10 in the CE indexes. Report scope Methodology report structure and methodology Energy market segmentation here we size the market for non-domestic electricity and gas supply contracts and segments it by small and medium enterprise (SME), private sector industrial and commercial (I&C) and public sector consumers. It also comments briefly on the structures of supply contracts as they have influence on how TPIs provide their services; Cornwall Energy TPI Index methodology TPI presence here we estimate the proportions of contracts and energy volumes they negotiate versus those entered into by customers direct, differentiated by sector. The energy volume assessments provide an input to estimates of total revenue pool available from non-domestic electricity and gas brokerage; Business models and services here we describe the different types of organisation providing energy brokerage and the services they offer beyond negotiating energy contracts TPI landscape here we set out: our methodology for the TPI Indexes; the SME TPI landscape with regard to services, finances, employees and contracts and our SME TPI Index; I&C TPI landscape with regard to services, finances, employees and volume and our I&C TPI Index; the I&C broker landscape with regard to the public sector; a commentary of our TPI Index; and TPI market shares; Representation and regulation here we summarise the development of the TPI sector and the work to raise standards through representation, codes of practice and specific regulation; and Current challenges here we will look at: the latest mergers and acquisitions of TPIs; why TPIs consolidate; implications of consolidation; routes to market including retention, business sector, region and affinity arrangements; TPI developments; TPI relationships with suppliers; and prospects for the TPI market. 5 P a g e

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9 Example section from the report SME As mentioned in Section there is no regulation that compels suppliers to make the same product available to all TPIs, and there are regular special campaigns between suppliers and larger SME TPIs. These campaigns tend to be based around variations of the standard acquisition products for instance offering lower prices to the customer, higher commissions to the TPI, extended supply terms or early renewal. Early renewal deals have been a feature of the energy contract market in 2015 as suppliers and TPIs seek to shore up market shares and customers aim to secure flat or lower costs given falling wholesale prices. Renewal contracts tend to be prepared on a bespoke basis by suppliers. Often the TPI will be used as the conduit for providing the offer to the customer. But this is not always the case, and suppliers may also seek to renew the contract with the customer direct and circumvent the TPI. Together with the practice by suppliers of paying less or even not at all for contract renewals is a significant cause of tension between suppliers and TPIs. Most larger suppliers will specify the base and maximum commissions they are prepared to pay for different types of SME contract. Although commission terms are one tool suppliers use to compete to secure brokered contracts, where they arise, very high commissions can also be specified by the TPIs themselves. In order to qualify for the commission, TPIs will be expected to have: qualified that the customer is able to switch from its existing supplier and meets the criteria including creditworthiness for receipt of the offer; complied with processes specified by the supplier including following prescribed sales scripts and the submission of e-contracts or recordings of phone calls for verbal sales; properly captured the information of the customer s energy consumption especially meter reference numbers; and secured a signed supply contract from the customer along with either a signed direct debit mandate, a recorded verbal agreement or an e-contract. Customarily the receipt of a countermanded contract from the customer followed by successful registration of the energy meters in the switching databases is the cue for a commission payment to become due to a TPI. Suppliers typically seek to phase payment of commission over the lifetime of the supply contracts. Where early payment is made, commissions may be discounted or on the proviso of reconciliation or claw back if the consumption does not prove to be as high as expected. Typically, it is customary for up to 80% of commissions to be paid during the life of the contract year with the remaining balance on it to be paid after successful completion of the contract. In its 2015 interim results, Inspired Energy illustrated how it had been seeking to improve the commercial terms that it held with energy suppliers. Of the five suppliers with which it placed most SME business, a minimum 60% of commission was being paid to it on the live date as Table 5:1 shows. The company reported that it had improved the terms with the Suppliers C and D during Table 0:1: Headline terms between Inspired Energy SME and energy suppliers 2015 Revenue by Suppliers H FY2014 Terms Supplier A 28% 22% 80% on live date Supplier B 31% 51% 60% on live date Supplier C 9% - 100% on live date Supplier D 6% - 80% on live date Supplier E 10% 11% Monthly in arrears 9 P a g e

10 Others 16% 16% Various Inspired Energy is of a scale to be able to negotiate terms with suppliers. This is not an opportunity open to most TPIs. Most suppliers, particularly the larger competitors, will try to formalise their arrangements with TPIs through specific contracts, though many TPIs have been nervous of signing up to these documents with a feeling that they were unduly onerous. There is still no formal requirement for energy TPIs to disclose to their SME customers that they are receiving commission from suppliers or the amount of commission they receive, although it is widely considered good practice. It is feasible that this situation could change should energy brokerage become regulated or subject to a binding code of practice. Section 7 discusses the latest regulatory developments. 10 P a g e

11 Example TPI profile pages Energy TPI Profiles Q215 cornwallenergy These profiles have been prepared by Cornwall Energy in Q214 as part of a review of the market for Cornwall Energy's TPI service. They form an Appendix to the main TPI report and cover financial information based on Companies House reports plus selected other information. Sector SME/ I&C Listed in SME Index Yes/No Code of practice signatory UIA/TPI CoP Broker Cornwall Energy Index Chart showing the Cornwall Energy Index results for the TPI for services, employees, finances and overall compared with the average. All I&C TPIs Difference Rank Index Volume Services Finances Employee I&C Index Table showing Cornwall Energy's Index results, the position from the average result and the rank. Services Index Finances Index Employee Index Market intelligence Financial period Information Head office gathered by Information Shareholder Cornwall Bureau gathered funds range Energy from by the latest Risk management Cornwall Turnover ( mn) financial Energy accounts Usage/ energy from TPI Finances reported to management websites. Index Companies House. International Volume band As assessed by Cornwall Services Index Volume index Energy Cornwall Energy summary Employee band Employee Index Our opinion of each TPI based on information we have gathered together with information on services. Shareholders Shareholders of the company Shareholder proportion(s) Director(s) Director(s) of the company Latest developments Information gathered by Cornwall Energy from TPI websites and other sources in the public domain on company developments/ news, customers and charging. Suppliers TPI deals with: Website Where it has been specified by the TPI, we list the individual suppliers the TPI works with. The lists may not include all suppliers a TPI works with. Website address Cornwall Energy, 2 Millennium Plain, Bethel Street, Norwich, NR2 1TF T F P a g e

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14 These TPIs are the subject of Cornwall Energy s TPI profiles: SME I&C Limited 1power 2 1power Active Energy Direct 3 ACM Energy Consultants Affiliated Utilities 4 Active Energy Direct Alfa Energy 5 Advantage Utilities Amber Energy 6 Alfa Energy Ameresco 7 Alliance Contracts Annex Solutions 8 Annex Solutions Apollo Energy 9 Apollo Energy Argyle Energy 10 AT Energy UK Auditel 11 Auditel B Logical 12 B Logical Bergen Energi 13 BBA Energy Black Sheep Utilities 14 BCR Associates Blizzard Utilities 15 Black Sheep Utilities Blue Castle Energy 16 Bluemark Utility Consultants Box Power CIC 17 Box Power CIC Briar Associates 18 Business Advisory Service British Independent Utilities 19 Business Advisory Support Business Advisory Service 20 Business Cost Consultants Business Gas 21 Business Direct Utilities Business Juice 22 Business Energy Switch Buy Energy Online 23 Business Juice Carbon Business Save Catalyst Commercial 25 Capital Cost Consultants Central Power (Bnorth) 26 Catalyst Commercial Clifford Talbot 27 CEC Concise Energy Brokers 28 Central Power (Bnorth) Cost Advice Services 29 Church Energy Savings Consortium Cost Centre Services 30 Commercial Power Cost Reduction Services 31 Concise Energy Brokers CUB UK 32 Cost Centre Services Direct Power Associates 33 Costgard E Switch 34 DHS Group ECM (UK) Limited 35 Direct Energy Associates Eden Energy Consultants 36 Downland Utilities Eneco 37 E Switch Energy & Carbon Management 38 Eco Logic Partners Energy Auditing Agency 39 EcoSave Commercial Energy Consultants Energy Cost Advisors 40 Eden Energy Consultants Energy Impact 14 P a g e

15 41 E-G Audit Energy Management LLP 42 Eneco Energy Management Services 43 Energy Advice Line Energy Partners 44 Energy Management Services Energy Renewals 45 Energy Partners Energy Services (Business Power) 46 Energycentric (Energycentric North West) Energy Solutions 47 Energylinx for Business Energy Switch UK 48 Environmental Energy Group (South West) EnergyQuote JHA 49 ESS Energy ESS Energy 50 Every Aspect European Utility Consultants 51 Executive Energy Eutility 52 Fairnet Commercial Services Fairnet Commercial Services 53 Focus Assured Services Fortis Energy 54 Fortis Energy Gateway Energy Solutions 55 Fresh NRG Inenco Group 56 Full Power Utilities Informed Business Solutions 57 Gateway Energy Solutions Innovative Energy Consultancy 58 GET Solutions energyteam (Inprova) 59 Ginger Energy Inspired Energy 60 GPS Energy Ista Energy Solutions Ltd 61 Hyyper Energy Solutions Just Energy 62 ICIS Energy Jutton Associates Limited 63 Ideal Energy LG Energy Group 64 Indigo Swan Logical Utilities 65 Inenco Direct LSI Independent Utility Brokers 66 InEnergy Lumina Energy 67 energyteam (Inprova) Make it Cheaper 68 Invew Managing Utilities 69 IU Energy Maxim Eyes 70 JB Consultancy Maxwell Grant 71 KonCept Energy My Utility Genius 72 Linton Chapel Associates NUS Consulting 73 Lourdes Associates Octego 74 Love Energy Savings Open Energy Market 75 LSI Independent Utility Brokers Optima Energy Management Services 76 Lumina Energy Orchard Energy 77 Make it Cheaper PCMG 78 Managing Utilities Pemxq 79 Maxwell Grant Power Efficiency 80 Mega3 Energy Services Procuria 81 Mikhno Group Pulse Business Energy 82 My Utility Genius Resolve Energy 83 Nationwide Energy Consultants Utilities SB Energy 15 P a g e

16 84 Nationwide Utilities Schneider Electric 85 NRG Corporation Scottish Utilities 86 Online Direct Senco Energy 87 Open Energy Market Slash Marketing 88 Orchard Energy Smith Bellerby 89 Overheads UK Square One Utilities 90 Paul Strachan Consulting SSC Energy 91 PCM Switch Start Energy 92 PH Energy services STC Energy Solutions 93 Phoenix Energy Sustainable Advantage 94 Power Direct Switch & Save Utilities 95 Power Solutions UK Taurus Utility Consultants 96 PowerSwitch.com Thames Utility Brokers 97 Price Consultants The Business Works Organisation 98 Pro Eco The Energy Brokers 99 Procuria The Energy Company 100 PSR Energy Brokers The Energy Network 101 Pulse Business Energy The Finance House 102 Purchase Direct The Monarch Partnership 103 Riverview Utility Consultants Touchstone Services 104 SB Energy Tower Utility 105 Scottish Utilities Trident Utilities 106 Select Energy Direct Turner Jordan 107 Shop 4 More UPA Energy 108 Slash Marketing Utel Audits 109 Smart Business Buying Utilities Direct 110 Smart Change Consulting Utilities Savings 111 Spiral Group Purchasing Utilitrack 112 Square One Utilities Utility Assist 113 SSC Energy Utility Bidder 114 Start Energy Utility Business Services 115 Swift Switch Utility Focus 116 Switch & Save Utilities Utility Partnership 117 Switch Energy Gas & Electricity Brokers Utility Savings Corporation 118 Switch it 4U Utilitywise (including EIC) 119 Switch My Business Utilyx 120 Taurus Utility Consultants UX Energy Services 121 The Business Works Organisation Zenergi 122 The Energy Company Zero Trace Procurement 123 The Finance House 124 The Green Consultancy Inc. 125 Torse 126 Touchstone Services 16 P a g e

17 127 Tower Utility 128 Trident Utilities 129 UCR Consultants 130 Untied Utilities 131 UPA Energy 132 Utilitas Solutions 133 Utilities Savings 134 Utility Aid 135 Utility Assist 136 Utility Bidder 137 Utility Bill Helpline 138 Utility Helpline 139 Utility Renewals 140 Utility Trade 141 Utilitywise (including EIC) 142 Watt Utilities 143 Wise Utility Those in red are new to the Q215 Cornwall Energy Index. Further information For further information regarding this service, contact Robert Buckley on or or Colin Magee on or This prospectus is copyright under the Berne Convention. All rights are reserved. Apart from any fair dealing for the purposes of private study, criticism or review, as permitted under the Copyright, Designs and Patents Act 1988, no part of this publication can be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, electrical, chemical, mechanical, optical, photocopying, recording or otherwise, without the prior written permission of the copyright owner. Enquiries should be addressed to Cornwall Energy info@cornwallenergy.com 17 P a g e