A guide for local authorities, housing associations and community groups

A guide for local authorities, housing associations and community groups

ovoenergy.com/communities

Contents Executive summary Executive summary Introduction OVO Energy Why communities? Ovo Communities Energy supply Customer service Billing Trading Industry settlements Reporting Smart meters Energy efficiency Generation Power Purchase Agreements Feed-in Tariffs The UK energy industry started off as a community endeavour. The world s first electricity supplier was a community-based scheme powered by a water wheel on a nearby river. By 1915 there were 600 electricity suppliers across the UK, but nationalisation effectively reduced them to just one. Today, 25 years after privatisation we have six large, vertically integrated incumbents, controlling 95% of the market between them. The story of today s market is played out in the headlines every day: it is opaque and illiquid, with high barriers to entry and very little real competition. Prices have risen, and levels of trust have plummeted to the point where the vast majority of consumers have simply disengaged with the market altogether. This is the reason we set up OVO Energy five years ago because we firmly believed we could do better. Our commitment to our customers has always been simpler, fairer, cheaper energy. Now we want to go further than that. OVO Communities is an out of the box solution, enabling and supporting communities who want to cut out the middle man and become an energy services provider from supply and generation, to smart technology and energy efficiency. We are offering every local authority, housing association and community group access to our expertise, infrastructure, highly efficient systems and on-going support. We will provide the comprehensive toolkit and guidance so that communities can reap the benefits of cheaper prices, local generation, reduced usage and, crucially, greater trust that they are getting a fair deal. After nearly 100 years, we want to return power to the people. How would a partnership work?

OVO Energy 1 OVO launched in 2009 with a simple idea and a big vision that we could do a better job of supplying energy to UK consumers than the existing energy companies. Consumer trust was non-existent after a decade of rocketing prices and poor service levels that coincided with rising energy supplier profits. Despite little industry experience and being told it could not be done we ve established ourselves as a genuine alternative to the big suppliers that have dominated the market for so long. Today, we supply gas and electricity to over 300,000 customers and continually strive to offer the very best value and the highest levels of service. We ve hired a team of talented people who share our vision for putting people first, then profits. We don t pay lip service to putting the customer first ; we actually behave as though the customer is in the room with us, which engenders longer-term thinking in an industry that has been guilty of regressive short - term profiteering. For our customers, the promise has always been clear we want to make energy cheaper, greener and simpler. Paying 3% interest on credit balances and always offering our best price are just two ways in which we bring this promise to life. We continually invest in technology that gives our customers the very best experience and helps keep our energy prices as low as possible, for as long as possible. As a team, we re not afraid to speak out about the dubious practises we ve seen undertaken by larger suppliers; whether that s differential pricing tactics, falling wholesale prices not being passed onto customers or the need for more competition. Above all, we practise and advocate honest and transparency in an industry that is beleaguered by opaque practises that confuse consumers. We believe we re building a great business and a great brand but we can t change the way energy works in this country all on our own. That s why we re launching OVO Communities. We are also much more efficient than any of the Big Six energy companies despite our smaller size and we pass these benefits on to our customers. During 2012 a medium usage OVO customer would have paid 113 (11%) less than a typical Big Six customer. 1200 1100 1000 6 11 16 21 15% 25% 35% 45% 55% 65% 75% 85% Average for the Big 6 Outstanding value for customers Since launching back in 2009 we have scored consistently high results in customer satisfaction surveys. The chart on the next page demonstrates our market-leading combination of competitive pricing and excellent customer satisfaction. OVO energy * New entrant; no satisfaction score available Sources: Which? January 2014, EnergyLinx 24th April 2014, Ofgem segmental accounts, OVO accounts National price position is calculated using the national average price for a medium consumer, profile 1 (13,500 kwh gas and 3,200 kwh electricity) Average revenue is calculated using the average unit revenue per kwh of gas and electricity supplied in 2012, excluding VAT

Why communities? UK consumers need to become more engaged with energy if we are to address the challenges of affordable energy, security of supply and decarbonisation. Distributed energy provides the necessary mechanisms to address these issues at a local level, but is not sufficient on its own. Communities Trust People trust their communities to give them a fair deal on energy. In a new study carried out by OVO Energy nearly three times more people felt they would get a fairer deal from a community energy company than a big energy supplier, and 47% of those surveyed said they would prefer to buy their energy from a community energy company even if need to be taking a leadership role for three important reasons: Trust Local benefits Behavioural change the price and service was the same as they would receive from other suppliers. Councils are particularly well placed in this context: a poll carried out by the Local Government Association found that 70% of people are satisfied with the services their council delivers. Community energy in the UK Today there are currently over 5,000 community energy groups in the UK. These benefit households in a number of ways, for example by providing free electricity thanks to rooftop solar panels, creating the opportunity to invest in local renewable energy, or reducing energy bills through collective switching. However, by and large Local generation Crowdfunding these schemes operate in isolation and the benefits only accrue to a lucky few. Community energy groups are not yet able to offer a single package that combines all of the pieces of the energy puzzle, and that is also accessible by everyone in the community. At OVO we think communities deserve better. Everyone should be able to access the lowest cost energy possible. They should be able to receive tailored support to help reduce their energy consumption, and to share in the benefits of local clean energy sources. We believe local communities should have power over their energy supply: where they get it from, how much they use and how much they pay. Local benefits Community energy schemes are one of the most effective ways of getting people engaged with energy issues. This engagement not only helps people understand how to get the best deal from their energy supplier, it has also been shown to increase support for new energy projects. Lambeth Council has recently succeeded in creating a community-led renewable energy scheme addressing local fuel poverty, creating jobs and work experience opportunities. Homes with solar Homes without solar Influencing behaviour Behavioural change is a key ingredient in reducing energy consumption. Many nationwide initiatives have looked at how to reach out to the poorest people and provide them with affordable energy, but these initiatives have often struggled to overcome disengagement among the people they aim to help. Research has shown that top-down energy efficiency advice from government or large companies is often met with a mix of confusion and distrust. Through their local presence, expertise and representation, communities can encourage grassroots change far more successfully. Community energy should be for the benefit of all, not the few.

OVO Communities Energy Supply Our community energy offer represents a paradigm shift in current thinking. Most community energy schemes have been solely focussed on local generation, but we aim to take a more holistic approach. With OVO Communities, we offer organisations the opportunity to effectively run their own energy supply business, with all the benefits and none of the hassle. Through this initiative, our partners can create local energy tariffs that are powered by locally generated heat and power. They can integrate smart metering technology in their customers properties, allowing them to see where their energy is coming from and how much it is costing them. They can also offer access to energy efficiency measures to help customers save money on their bills and even allow customers to compare their consumption with their neighbours and others in the community. But most of all they can be sure that they are providing the best possible combination of service and value for money. There are four key elements to our offer: energy supply, smart metering, energy efficiency and power generation. Energy Supply Power Generation Our expertise and system infrastructure will help our community energy partners to effectively set up their own supply business, from front to back office, from trading to marketing. Smart Metering Our smart meters can be used to replace either traditional meters or prepayment meters. You and your customers will be able to see realtime energy usage, which can be used to compare portfolios of homes to identify the most energy efficient or inefficient properties. Who is it for? We want to make sure that local people are at the heart of all Community Energy projects. With that in mind, our offer is only available to Local Authorities, Housing Associations, Community Benefit Societies or other Smart Metering Energy Efficiency OVO can support our community energy partners efficiency campaigns and initiatives by providing Energy Company Obligation funding and by acting as a coordinator for local installers. Power Generation OVO can buy energy from local generators. Whether your community is considering investing in renewable generation, or already owns generation facilities, we pride ourselves on offering highly competitive rates for your electricity. organisations with a similar community ethos. Individual projects do not need to be 100% community owned, but should be run for the benefit of the community.

Energy Supply How does it work? You are a local authority or community group who decides to take advantage of all of OVO Communities; but what does this actually mean? You do We do Register with OVO Communities Register brand and trademarks Set up a legal entity - as necessary Provide detailed info on possibilities Sign an agreement Provide you with a welcome pack The ability to supply local customers directly is one of the key benefits of OVO s community energy offering. Energy supply is our speciality; we have worked hard to create a company with highly efficient operations able to deliver excellent customer service. Our expertise will help our community energy partners to effectively run their own supply business and can include a bespoke tariff powered by local generation. Let s assume that your community owns an onshore wind farm with a capacity of 5MW. The UK onshore wind industry s forthcoming community benefits protocol suggests that a wind farm of this size would pay approximately 25,000 per year into a community benefit fund (i.e. 5,000 per MW). Let s also imagine that if OVO Energy were to sign a standalone Power Purchase Agreement (PPA) for the electricity output, we would offer 50 per MWh. Alternatively we could buy the electricity at a discount of 5 per MWh, which would There are five elements to our community energy supply offer: customer service, billing, industry settlements, trading and reporting. We expect to manage most customer-facing activities such as billing, customer service and customer communications although we can also support your organisation if you prefer to do some or all of these activities in-house. If you already have your own generation save OVO 65,000 per year assuming an annual output of 13,000 MWh. We would then use this saving plus the 25,000 community benefit to lower the electricity bills of the households in your community. You would be in full control of selecting how many households in your community receive lower energy bills. Using the above example, a pool of 1,000 entitled households would see their annual energy bills reduce by 90. Step 1: Get started Decide on target customers Help model the economics & options Step 2: Define community Decide where to buy your power Trade on your behalf Set your price point Develop a pricing model Decide on discount mechanisms Ensure offer complies with regulation Step 3: Design your offer Manage online registration process Define marketing channels Register on OVO supply license Start marketing the offer Process - incl. industry settlements Step 4: Sign up customers Regular reviews of performance Send statements and collect payments Update and amend offer as necessary Provide on-going customer service Engage with customer base Provide on-going operations Step 5: Run energy company

Customer service Better customer service is, quite simply, the premise that OVO was founded upon. With this in mind we have created specific processes and initiatives to help better manage our customer base and keep our customers happy. E-commerce Our website has an inbuilt quotation tool that allows customers to compare their current tariff with our energy plans, allowing them to receive a personalised quote specific to their property and circumstances. Prepayment customers can also compare their current tariff with our Pay-As-You-Go plan. Switching suppliers couldn t be simpler, and typically takes 5 minutes. Frontline support Our Customer Service team support customers throughout their journey; from sales enquiries to registering new customers, renewing contracts to dealing with all general customer queries our team is there to help. We don t use scripts; we just hire good people and give them the training and tools to make our customers happy. Sometimes things don t go according to plan and our customers need extra support. As soon as this happens, our Extra Care team is there to help. These experts identify customers who require special attention and take responsibility for resolving any issues as quickly as possible. Customer Relationship Management Our CRM platform manages all of our communications and interactions with our customers. It allows us to target communications at specific customer sets, and provides the opportunity to co-brand or even white label all of our correspondence. We ve developed front-end web services that provide a simple user interface for our Customer Service team this platform is user-friendly and has halved training times, allowing us to quickly scale as and when required. Access to this platform can also be offered to any partners who wish to manage the customer service element themselves. My OVO and our smartphone app We encourage our customers to self-serve as much as possible. This means enabling them to manage their account whenever they want, thereby reducing our cost to serve and alllowing us to further reduce our customers bills. All of this information is shown to the customer in real-time. We have also adapted this service making it available on a smartphone app; this allows customers to manage their energy account whenever and wherever they are. My OVO allows customers to quickly and easily access all of their energy account information online. With it customers can: Manage their account details Submit meter readings View their statements Make payments Request refunds Track their consumption

Billing Trading We have worked hard to create a billing solution which fits our customers needs and keeps the processes as simple as possible. We have developed a solution to deliver accurate statements, on time. Customers can choose to receive their bill on a monthly basis or when they submit a meter reading. They can also access an up to date bill through My OVO or by calling one of our Customer Service Advisors. Trading is the most complex and data intensive operation at OVO Energy. Our energy market experts are responsible for buying the electricity and gas for our customer base and for that of our community energy partners. considerable time and effort into forecasting wholesale prices and customer demand to achieve the best possible results. The team are also experts in forecasting the electricity that we buy from local generators. Ways to pay Customers can choose to pay monthly, via a standard direct debit, or they can choose our flexible direct debit option. Flexible direct debits allow customers to flex our recommended direct debit by between 75% and 150% each month, using My OVO, if they know they are likely to use more or less energy than normal. Any difference is collected in the following month. We created this option as feedback from our customers showed us that they wanted more control over their payments. Finally, Pay-As-You-Go energy allows customers even more control over when and how they pay. They can top up their smart meter as and when they want or need to, giving them more control over their budget. Energy is traded on a half-hourly basis, in some cases years in advance, and we invest Demand and Generation Forecasting For any single customer we need to calculate what we expect them to consume for the coming months and years, at thirty minute intervals. That means for each customer in our portfolio we make 17,520 calculations; and that s only for electricity. Many factors influence the demand for electricity local temperature, cloud cover, rainfall and sunshine hours are just the tip of the iceberg. Our proprietary in-house trading platform uses half-hourly forecasts for these and other variables to allow us to model demand and generation for individual customers and invididual generators. Our state-of-the-art systems use a combination of complex regression and neutral networks techniques to achieve the best possible results and have a proven track record of success. They have also been built to allow for scalability, as we expect to maintain these systems and processes as we grow. Extra help and advice We have set up a dedicated team to help those customers who may be struggling to pay their bills. Our experts work with customers to create a tailored payment plan, allowing customers the opportunity to repay any debit balances over a suitable and agreed timeframe. Wholesale Prices and Trade Execution We use live market activity data and daily forward curves to ensure that wholesale energy prices are constantly kept in check, keeping our prices reflective of the market and as low as possible for our customers.

Industry settlements The energy experts in our Industry Settlements team work hard behind the scenes to ensure that each customer journey goes smoothly. They are responsible for managing all of the industry processes that are required to bring customers on supply with us, they deal with all metering queries, and all interactions with the industry and other energy suppliers. The team is also in charge of meter exchanges for OVO Energy s smart metering business, managing the intricacies of switching from current dumb meters to smart meters. Supply registration processes and systems Switching a customer account from one energy supplier to another is a complex process with many touch points including industry-wide databases, other energy suppliers and metering agents. Most of these interactions are managed through a data flow mechanism: a common language spoken and understood by all energy industry participants. The platforms we utilise manage this complexity for us, and allow for a seamless process. Metering When a customer comes on supply with OVO Energy, we look after their meters, too. Our Industry Settlements department manages our metering agents, who are responsible for collecting meter readings and fixing or exchanging meters when they Exceptions and complex operations Today over 48m electricity and gas accounts are registered in the UK, many of which have never switched their energy supplier. It is inevitable that complex issues such as crossed or backwards running meters are uncovered as more customers start to seek are faulty. We only want our customers to pay for what they use and fully functional meters are crucial for this. We have also started to install smart meters at many of our customers properties. better deals in the market. Our complex operations team is staffed with our most knowledgeable industry experts who can unravel any non-standard issues on a case by case basis. Registration For an average dual fuel account, we expect to process almost sixty flows of data, thirty of these are on registration alone. With a customer base of over 300,000 that translates into 18 million data flows. Reporting We have built our own internal management information system that provides our team with automated and user-generated reports. These reports reflect all relevant customer information, and allow our team to be more proactive in problem resolution. Reports include all of the elements of supply and they also focus on key performance indicators for the various teams around the business. They provide our sales and marketing team with relevant analysis of our current acquisition channels, giving us a detailed understanding of how and why our customers respond to interactions with OVO. All of this information allows us to better understand our customer base. We can identify where the greatest improvements to our processes and operations can be made, and we can even consider how to market our offers more effectively based on real time customer feedback. These reports have been tailored to our teams requirements, focussing on customer status, regional breakdowns and sales channels, along with all the analytics that look specifically at performance. We also have reporting metrics with regards to our online portal and smartphone app, helping us to keep our finger on the pulse, and to deliver a service that our customers both want and value.

Smart Metering Secure data A fully smart home could generate as much as 75 gigabytes of data each year. Our Meter Data Management is a scalable solution which allows us to securely manage and analyse this vast amount of data. We take the security of our customers data extremely seriously and have put in place systems and processes to ensure their data is protected. In addition to supplying energy OVO also funds, installs and manages a growing network of smart meters to customers in the UK. These meters can be used in either traditional credit mode or as a replacement for prepayment meters under the OVO Energy Pay-As-You-Go plan. Both you and your customers are able to see real-time and historic energy use, which can be used to compare portfolios of homes to identify the most energy efficient, and inefficient, properties. Our smart meters also support the delivery of other smart energy solutions such as smart thermostats and Feed-In- Tariff (FIT) monitoring. This allows you to offer your community: Smarter, sooner Tailored energy saving initiatives All households in the UK will need to have a Smart meter by 2020; your community will be leading the way and will see the benefits sooner. Access to Smart energy data We can provide individual and aggregate smart energy data relating to housing within the community. From this we can work with you to target schemes to improve energy efficiency, if necessary. Every customer receives an In Home Display (IHD) or Consumer Access Device (CAD) which allows them to track their energy consumption. The near real-time visualisation of energy consumption offered can allow customers to compare their consumption over time or against other tenants offering innovative opportunities for tenant engagement, for example through energy saving competitions. Smart meters are provided at no upfront cost to the customer and we have a fully managed installation process which allows the customer to choose when they would like their meters installed. Once installed we provide all of the software required to deliver a complete and engaging customer experience, with first line technical support handled by our expert in-house team.

Energy efficiency Further innovation We are also currently investigating ways in which we can make the right home energy management systems available to our customers, including smart thermostats linked to our online energy management tools. As new products or services such as these are rolled out they will be made available to all of our community energy customers. Reducing demand through energy efficiency is the simplest way to reduce energy bills for customers in your community. OVO can support energy efficiency campaigns and initiatives by: Providing funding through the Energy Company Obligation (ECO) Acting as a central coordinator for local assessors & installers Providing tools to support energy conservation We can work with local installers to assess individual homes and install the appropriate energy efficiency measures. We will act as the interface between our partners and these installers, and expect to work together with our community partners to identify the most appropriate homes in each community to target. Energy efficiency measures go hand-inhand with the installation of smart meters as customers can see where their money The Green Deal We can also structure tariffs to support the Green Deal and other ESCO models, where the upfront costs of energy efficiency improvements are paid for through the is going; beyond the installation of energy efficiency measures we recognise that community groups have an important role to play in sharing advice and best practices, and in particular helping the vulnerable and fuel poor to find ways to cut their energy bills. OVO can support these activities by providing information on energy consumption patterns and connecting people from different community energy schemes. realised energy savings. These can be a very effective way of funding energy efficiency measures, for example in community buildings.

Power generation Feed-In-Tariffs (FITs) We offer the option of administering Feed-In Tariff payments alongside or independent of your PPA, keeping all of your energy contracts in one place. We can also manage Feed-in-Tariff payments for domestic customers, for example where they have their own solar photovoltaics installations. Qualifying generators are entitled to a fixed tariff rate for every unit (kwh) of electricity produced, regardless of whether they use the electricity themselves or not. Payments for any surplus electricity that is exported to the grid generally also apply. Future funding opportunities We want you to make the most of the energy you generate and can tailor a contract that works for you, offering the best rates and terms for your community energy scheme. PPAs are available to generators with a capacity greater than 100kW - whether your community is considering investing in renewable generation, or already owns and manages one or more generation We have the capability to integrate elements of this into the energy supply contract, in order to realise energy savings for the whole community. Power purchase agreements (PPAs) 1) Fixed price PPA facilities, we pride ourselves on offering highly competitive rates for your electricity export, renewable energy certificates and embedded benefits. You can choose from two types of PPA contracts: If you want to guarantee the income you get from your generator over a set time period, this is the PPA for you. We provide you with: We recognise that one of the highest barriers to wider adoption of community energy solutions is the availability and accessibility of finance. We plan to support community energy organisations in their efforts to lower the cost of funding by bringing together a portfolio of community energy projects to increase scale and diversification. We will then use our experience in raising commercial debt to source low cost funding for the combined portfolio. A fixed price for the power and embedded benefits for the duration of your contract with us; we can currently fix for a maximum of 60 months although we are looking to extend this in the near future Rates that are linked to the wholesale market at the time the PPA is signed A choice of bespoke pricing structures (e.g. seasonal pricing) A choice of Renewables Obligation Certificate (ROC) purchasing options The option to bring a portfolio of assets together under one agreement 2) Floating price PPA If you d rather not fix your prices then our floating rate PPA allows you to track the market by linking your power price to a market price index. We provide you with: Power prices linked to a market index (e.g. LEBA Day Ahead) for up to 60 months A range of index options Fixed prices for embedded benefits over the same time period A choice of ROC purchasing options

How would a partnership work? We offer you the flexibility to choose the right level of partnership with OVO. We will provide you with the tools to effectively run your own energy company, and give you the building blocks to incorporate more or less of the OVO Communities offer as you see fit. All of our services are offered with one eye on the future, providing you with the ability to easily scale and develop the services that you want to offer your community. This allows you to combine a tailored energy tariff with local generation to deliver cheaper energy for customers in your community. Any savings generated are passed on in the form of a discount to your customers energy bills. For all of our services we operate on a cost-plus approach. This gives you absolute transparency over the costs that we incur, and enables your organisation to benefit from the same high levels of efficiency that allows OVO Energy to provide our customers with some of the cheapest energy in the UK. What happens next? For more details of our community energy offer, or to arrange for one of our expert team to review your energy needs, contact us at communities@ovoenergy.com

ovoenergy.com/communities communities@ovoenergy.com