I’ve been to several energy conferences over the last six months. At all of those events, I’ve heard the same question and concern: “As an energy supplier, how can we avoid competing on price and instead compete on the value we offer customers?”

Price is not always the primary factor for everyone, but it certainly always matters, especially to customers comparing their natural gas options. A lower price will not only attract customers in and of itself, but will also give the company an opportunity to offer additional services while still keeping the cost of the total package attractive to the customer.

Step 1: Optimize Pricing Operations

Based on Fino’s experience working with energy suppliers–along with aggregators, brokers, and consultants (ABCs)–very few companies accurately understand their natural gas commodity costs. Instead, they typically build room into their pricing to account for uncertainty given the complexity of the natural gas market. This results in higher prices for customers.

Furthermore, delays between computing the price of a natural gas contract and executing that contract only increase the risk baked in to the price.

For energy retailers to eliminate risk in commodity cost, they need to:

• accurately calculate the cost of natural gas by interpreting complex tariffs and exceptions
• represent cost as a component in the price in real time to the customer at contract, and
• execute and hedge the contract in real time.

Accurate natural gas cost models will reduce supplier risk and therefore reduce price for customers.

Step 2: Add Value

As pricing is optimized, additional value-add services can be offered. Those can include, for example, brand building and customer engagement efforts, as well as additional products and offerings.

Nest, oPower, and other platforms are proven techniques for increasing customer engagement through gamification and benchmarking. Panoramic Power recently partnered with Direct Energy to enable customers to monitor and manage their energy more efficiently. Predictive analytics, customer engagement, and retention models can flag opportunities for the supplier to offer more valuable services to their customers.

The suppliers that are able to best differentiate themselves will be those that can maximize their operational efficiencies and simultaneously offer value-add services to help customers control their energy costs.

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