Stephen Varga is a Research Fellow with over 25 years’ industrial experience in the management of logistics systems. He has been involved in mapping, data collection and simulating UK industries in freight goods, and energy supply, with the aim of reducing carbon emissions, improving efficiency, and reducing resource consumption. His objective is to provide solutions to complex supply chain management challenges.
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Modeling the emergence of multi-utility service companies in the UK domestic energy market
Volume: 17, Issue 2
The paper looks at the potential for multi-utility service providers to create business models that compete with traditional utility product providers whereby customers' services increase and resource efficiency is improved. The objective in our modeling is to show the how Multi-Utility Service Companies (MUSCos) could invade the market, changing it from markets focused on selling, for example, energy to customers, to markets aimed at selling efficiency. The output of our modeling is the extent to which the resource efficiency of UK homes can be significantly improved, and we show this in 10 centile categories. The key difference between the two types of providers (Traditional and MUSCo) is that while households can switch traditional suppliers fairly rapidly (3 months), if a household signs up to get house improvements and utilities from a particular MUSCo, then the arrangement will be at least 5 years, and possibly longer. This means that households, once they sign up are no longer ‘on the market’ for utility supply. Although getting a contract signed may take much more time for a salesman than simply getting a normal utility order, the fruits and the income are guaranteed to the MUSCo for 5 or 10 years. Their sales force efforts can be switched to non-contracted households. So, essentially both utilities and MUSCos are trying to sell to the normal, non-contracted households. The real advantage that a MUSCo customer is that there is a discount on both the house improvements offered and the price of future supplies of energy and water. MUSCos are able to offer reduced cost of house insulation, appliances which reduce consumption and waste from multiple utilities, and can achieve marginal profits from financing of these appliances.