Guest Blog: Stuart Lloyd-Evans – The importance of price transparency

Until now there has never been a simple, consistent price index for delivered energy to customers, a key facilitator to the low carbon transition

Festival Net Zero 2021

The energy market is complicated.

Every year it gets more complicated and there are a seemingly ever-increasing number of price elements that make up a customer’s bill.

In the B2B supply market the solution to complexity has been for customers to take on ever more complex tariff structures with price pass through and (in some cases) reconciliation to actual costs. In some circles there appears to be an expectation that customers in the domestic market could end up with a similar level of complex pricing structures but we think there is an alternative that avoids the potential turn-off and mis-selling risks associated with complex products and domestic customers.

In the wholesale energy markets, there is a long history of price transparency – indeed the market simply could not exist without transparency and simple price discovery. Yet in the retail market, things have generally gone the opposite direction, with more complexity reducing the ease of price comparison.

So at Cielo Energy, we developed the Cielo Index to provide the market with a weekly publication of a simple, independent, transparent price index.

Customer engagement with energy, has always been and may well remain low without the simple transparency offered by a price index. In today’s market this makes it hard for suppliers to demonstrate their competitiveness through direct sales channels and even price comparison websites can’t offer an independent comparison due to the commission paid on sales.

Ultimately this could also really hamper the amount of flexibility end customers choose to offer to help with the low carbon transition as things move forwards as they cannot understand the value they are being offered.

The Cielo Index, recently launched by Cielo Energy, provides price transparency and gives suppliers, customers and all parties engaged in the domestic energy market a clear view of the prices at which products are being offered. We track the most popular product types offered in the market, by contract duration and energy source to track prices that show consistency of products over time. By monitoring in this way independent insight into how the domestic energy price is moving is simple, providing new clarity on trends and market positioning.

The index provides a benchmark to give participants some immediate value:

  1. Price bench-marking against a consistent, independent product set.
  2. The opportunity to guarantee long term price competitiveness against the index price.

Looking to the future, transitioning to the low carbon world will require customers to engage and offer their flexible demand to the market in some form or other. Rather than adding further complexity through complex time of use tariff structures, using the Cielo Index will allow customers to be offered a guaranteed price saving against the index market price.

By using the Cielo Index there is a way of guaranteeing customers a price discount to a ‘do nothing’ tariff price for offering flexibility, without having to expose them to complex price structures. This will help with customer engagement and also allow the risk to be put in the right place – with the company that can actually manage it, not the individual domestic customer who cannot.

The retail market has got phenomenally complicated over recent years and looking at some of the supplier failures of late it appears that even some companies in the market haven’t understood all of the obligations they have, which does not bode well if small consumers take on more market exposure. We believe that the provision of a simple, all inclusive price index will help the market to offer current and future products to domestic customers in a way that they understand, which avoids over-complicated tariff structures.

The Cielo Index is aimed at suppliers, aggregators and anybody interested in the energy market; giving a simple, independent view of the market price for delivered electricity and gas. With this, customers can be offered simple, competitively priced products; building trust and delivering the engagement needed today, and in the future, to support the energy transition.

We are currently offering an introductory offer of a four-week free trial and discounted subscriptions for any new subscriptions during November 2019. Find us at www.cieloindex.com/trial

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