Agenda item

The Committee heard evidence from Reg Platt, Senior Partnerships Manager, OVO Energy.

In Reg’s presentation and the discussion the following points were made:

·         OVO was an independent energy supplier which was launched in 2009 and had 440,000 customers. It aimed to have 1 million customers by 2017. It was the 10^th fastest growing company in the UK.

·         OVO’s mission was to be the UK’s most trusted energy supplier. It had a high customer satisfaction level, offered competitive pricing and had won a number of awards.

·         The energy supply marker was transforming. In 1997 the ‘Big Six’ energy suppliers shared almost 100% of the market, In Autumn 2014, independent suppliers had a 9% market share and the Citibank prediction was for independent suppliers to have a 30% share of the market by 2020.

·         Councils could use collective switching to reduce energy bills in their borough.

·         If local councils became energy suppliers this could ensure people and businesses paid a fair price for their energy; it could integrate with other energy activities (e.g. energy efficiency, renewable generation and community energy) and maximise their value and it could be self-financing and potentially income generating.

·         This model was independent from national policy and was strongly supported by government.

·         Approximately two thirds of households did not switch and often overpaid significantly when compared with the cheapest prices. Many of these householders were on low incomes and were vulnerable and often they did not switch as they had a mistrust of energy companies and/or did not know how to switch. Local authorities could reach these customers because they were trusted and could engage people through unique channels.

·         Many Islington residents could save up to £300 by switching and customers who used prepayment meters could also save.

·         Councils could become energy suppliers using OVO’s supply licence and back office functions. OVO would act as a platform and councils could choose to migrate from the platform to have a full supply licence.

·         OVO could provide a supply licence and provide services such as customer service and a billing service and the council’s responsibilities would include setting the price, designing the tariff and acquiring customers. All customer facing services could be branded as council partner or co-branded.

·         OVO services could be provided at cost plus a 3% margin and there would be no set up costs.

·         This service was only available to councils, social housing providers and community groups.

·         OVO planned to be at the forefront of the move to smart meters which provided better, real-time data, smarter homes and enabled more customer engagement as well as flexible payments. OVO would remove prepayment meters from those who signed up and were currently using them and replace these with smart meters. These could be used in a similar way to prepayment meters or could be topped up using a phone if the resident had set up a link to their bank account. If the person was a low credit risk, they could be moved onto a standard tariff.

·         OVO helped support and supply local zero carbon power and reduce bills.

·         OVO would launch one partnership per month from March 2015. The first partnerships would be with Cheshire East Council, Peterborough City Council and Southend-on-Sea.  OVO had 300 potential partners, 150 of which were councils.

·         In response to questions from members, Reg Platt advised that the lead in time would be two months, councils signed up for a five year contract and residents signed up for one year. Energy companies could only offer four tariffs but Ofgem had given OVO an exemption so each partner could set its own four tariffs with one of these at a variable rate.

·         Operational costs were fixed but the cost of energy fluctuated so the tariff could be changed at a tariff review meeting each month or could be changed less regularly i.e. up to every three months.

·         Tariff options were discussed. Legal advice would need to be sought on whether there could be a subsidised tariff for vulnerable residents. It was possible that there could be a tariff for those willing to pay a premium to benefit the community.

·         The energy supplied by energy companies contained on average 15% renewable energy. OVO’s target was 30%.

·         OVO had passed the Energy Companies Obligation threshold which meant it had to spend a certain amount of money on energy efficiency improvements which met certain criteria. It would spend this money with partners.

·         If the council generated energy e.g. solar energy of CHP, this could be used in the supply of energy.

·         Councils could register void properties to receive a council energy supply.

·         The Committee asked about potential risks for the council. Reg Platt explained that OVO would manage debt collection and the liability of debt would sit with OVO. The cost of managing the debt would be included in the tariff.

RESOLVED:

That the evidence be noted.