André Jurres

29 apr 2012

Energy in Belgium is a hot topic which is in large contrast of the Netherlands.  The turmoil that exists here every week about the expensive energy prices is totally missing in the Netherlands and surprising.  The average cost of your electricity and gas bill is on average 2000 tot 2500€ for which we can life comfortably in our climate.  The perception that our prices are to high are mainly caused by the remaining dominant historical companies like Suez/GDF/Electrabel and EDF/Luminus.

After the temporarily introduced measure of caped prices as from the first of April our federal regulator Creg now starts to introduce a set of rules on how the product needs be calculated.  As such is uniformity a good cause as it becomes simple to compare prices, except we should not forget that interfering in this part of the market that was liberalized can also be dangerous.  What was remarkable in the communication was that Nuon was mentioned in the same phrase as the two historical monopolists which have been targeted by the government recently.
Using the name of a still relative small supplier and also challenger in the market(only started as new supplier in the second half of 2002) seems to me a mistake in the communication.  If this is not the case than we should understand that the measures being taken also hit all new players/challenges such as Eneco, Lampiris, Essent or Nuon.  That the customers are recently switching massively is very positive but this can change rapidly again when the media attention fades away.  That the margins will come under stress is most likely.
It will also become more difficult to differentiate for these challengers from the historical suppliers.  What are possible solutions to insure that we always pay the correct price for such a product?   Today we still do not know what is the profile of our customer and his consumption on real time bases, as such we still work with synthetic profiles provides by the regional regulators.  The fact that we can still not see what somebody is consuming is really not of this age.  Hopefully the federal regulator Creg will not forget to introduce supportive regulation to motivate the metering companies to roll out these so called smart meters.
If we can only read the daily/hourly consumption of a customer we can hardly call this smart(of course when looking at the current pre-historical method we can). These smart boxes should also be able to control our machines in the average household.  As such we can centrally manage these machines, for example start dishwasher when there is too much(read cheap) power available.(this thanks to the increasing market share of wind and solar)  Also suppliers can benefit from having these smart boxes as they can differentiate or at least start to think about differentiation other than price.
>In future suppliers will be able also to introduce more custom made pricing once they have a better understanding of the real time consumption.  Suppliers could/should even consider in installing their own smart boxes at the customer's premises taken into account of course that this takes a large upfront investment.  The customers that are interested in receiving real time billing for example will than sign two contracts, one for the supply of energy and one for the rent of a smart box.  As long as the customer stays with his supplier he can charge a lower monthly fee of a few Euro's but in case the customer would choose a different supplier he will have to pay a higher monthly fee (so called cross subsidizing).
Of course this is not possible today as installing official smart meters are a natural monopoly today of the meter companies but I am not sure if the federal regulator is not sensitive for this and would consider in liberalizing this part of the market to stimulate competition as it is going to slow today. 
>Another example could be that suppliers would install solar panels on customers rooftops on their expense and provide the local customer with cheap to free electricity.(depending on subsidy schemes present)  As such you can assure customer loyalty for a long duration as you are jointly producing local energy and both parties benefit from
These two examples are for sure not the only ones were suppliers can differentiate themselves as today they do not have any alternative.  If the suppliers want to break out of this new set of obstacles being created they will have to become more creative.  This of course being said it is clear that innovation is not a strong point of our sector especially in light of all the laws and regulation we get imposed.
The challengers in the market also have to try to speak as one voice when needed towards the politicians of our country.  Individually they are too small but together they are the only alternative for a competitive market.  Such an organization does not exist today in Belgium(meaning were only the challengers are part of).