Hill+Knowlton Strategies

Which? The consumer affairs group today launches the Big Switch campaign, designed to get the more than six in ten households who have never switched their energy supplier to consider doing so. Featured today in The Mirror and The Sun the campaign is encouraging consumers to submit their (non-binding) interest in order to collectively negotiate a better deal from the large energy suppliers.

The timing couldn’t be better and the Which? team deserve credit for launching in the middle of a cold snap when interest in energy prices is set to peak again. It is also just days into the term of new Secretary for Energy & Climate Change, Ed Davey, who began his Cabinet career by suggesting his focus would be on enabling consumers to get a better deal from their energy supplier. 

Which? Has long been a trusted consumer brand and I remember blogging last year about CBI research around the Green Deal that showed Which? to be the most trusted brand by consumers looking for advice. This campaign is in my mind overdue and I hope that it will be successful. I’ve signed up this morning and it was dead simple. Congratulations to Which? for kicking it off.

They will though face an uphill struggle in encouraging consumers to make the switch if the latest research from Ofgem is to be believed. In a report available on the regulator’s website they review attitudes to switching and new devices aimed at simplifying bills. It’s clear from the opening of the report though that the vast majority of energy users fall within a ‘disengaged’ category of people who don’t understand their bill, don’t appear to want to understand their bill and/or don’t feel there is much value in better understanding their bill because ultimately they do not trust that their time and interest will save them money. As I mentioned the Which? campaign faces and uphill struggle, but they have made the right start. I also just noticed the first tweets about this from @whichaction and @whichconvo. This is encouraging because a campaign like this is made for social networks. A shame though that Facebook hasn’t also been engaged by Which? I did look for their page to show an example of what they are doing, but perhaps they are waiting for the new Facebook timeline to launch on 29^th February.

Either way don’t delay, expressions of interest need to be logged on the campaign site by 31^st March.

It has been an age since my last blog and on the energy front things have been busy. The Statoil campaign in the UK has kicked into gear, we’ve had the Electricity Market Reform, release of strategic oil reserves (good blog from Platts yesterday), increased retail energy prices in the UK and continued debate about the future of nuclear in different parts of the world.

In the world of media too things have changed. Of course we no longer have the News of the World on our newsstands, but we have a new social network to play with in Google+ and apparently there are already 10 million users (for those interested I’m at http://gplus.to/chrispratt). We also had the launch of the Huffington Post in the UK, and the subsequent debate in the journalist twittersphere about unpaid content and commentary.

Personally speaking the pace of things at work and at home (moving into new house) has precluded much else, but the train journey has allowed me to make a start on the new book by Tom Bergin , Spills and Spin, about BP’s Macondo spill and the changes at BP under Lord Browne and Tony Hayward, which according to Bergin had created an environment more comfortable with risk than perhaps an oil company should be. It’s an interesting perspective and I look forward to the week off next week that will allow me some time to finish the book.

I’m also looking forward to reading more about the fallout from the EMR. One thing is clear about the reforms and that is that energy prices will increase to foot the bill for the investment in our national infrastructure. What the bill will be and how much the average energy consumer will have to pay, nevermind the extent to which heavy industry can afford to stay in the UK, will be the subject of much debate as the Government starts to provide the clarity required to make the calculations. From a communications perspective therefore much remains to be done as consumer groups, businesses, energy companies and Government line up for what will be a time of challenging messages. Something to think about on the beach? Probably not, but maybe when I get back.

As the saying goes, ’Trust is hard to earn and easily lost’. Equally its value is hard to quantify until it is lost (see the impact of GOM on BP’s brand value), which can sometimes make it difficult to invest in.

However, just because something is difficult both to do and then to test, does not mean we shouldn’t do it. As David Prosser notes in The Independent this morning the big six power generators have earned themselves an ignominious reputation, being less trusted than banks at the moment. That should be seen as a problem that needs to be addressed, not as an inconvenient truth.

One of the things that Ofgem has suggested in its reforms is that the big six sell off 20% of their generating capacity to increase competition and this is where the lack of trust could become a serious business issue. Just because customers have shown a reticence to switch in the past does not mean that an organisation who is very effective at communicating with customers and winning their trust will not come along and start to take share from the big six operators in the future. PA Cover Ofgem Announcement

These firms have a plethora of communications and policy issues to overcome at the moment, but a good start would be to simplify customer propositions, provide greater clarity about their operations, explain and educate about complexities of their business and engage in a better dialogue with customers and prospects. The low-carbon energy challenge in particular is one that I think most people would happily be more active in addressing and new-nuclear must now engage with a much wider group of stakeholders than it has until now to avoid the NIMBY reaction of people after the disaster in Japan.

First things first will be some research to test what has impacted trust historically and what influences different stakeholders trust.

What a busy start to the New Year it has been, so much so that my attempts to blog have been thwarted by a desire to see my wife for a little more than a handful of waking hours during the week.

With so much having happened, we thought it worthwhile taking a little review of January in the world of energy.

To The Moon

First off we had President Obama’s ‘Sputnik moment’ . His suggestion that America needed to seize the moment and take the lead in the technological race for dominance in renewable energy and sustainable technologies. His state of the union address was widely regarded as being well delivered, though his policies and narrative  have been called into question. Ultimately though I’m not sure the Sputnik analogy is an accurate one. Sure there is a long way to go for renewable energy technologies to become competitive with traditional sources, but in many ways the technology is available, it is the infrastructure and subsidy that needs to be set in order for renewables to ‘take off’. China moved ahead of the U.S. by adding a larger installed based during 2010 than anywhere else, by providing long term policies. The control economy will provide the sort of certainty that investors in the U.S. sadly lack, particularly as Congress missed the opportunity to provide long-term certainty and rolled over subsidy levels for just one year.

Like Rabbits

It was the Chinese and other ‘BRIC’ based investors who took the lions share of deal-making since the start of the year. Of course there was the BP Rosneft tie-up, though more on that later. As well we saw Petrochina take a stake in the Grangemouth assets of Ineos and Sinopec looks to extend its relationship with Repsol YPF in Brazil and CNOOC increase its interests in U.S. shale gas assets. 2011 is almost certain to witness a surge in merger and acquisition activity as the war chests are further swollen by rising oil prices and if the start of the year is anything to go by the BRIC players will be at the deal table as much as the traditional majors. The 3rd of February marks the start of the Chinese new year – the year of the rabbit – which if the year bears any resemblance to the well-known attributes of our furry friends could bode well for the M&A advisory community.

Creative Energy

So far at least it appears to be an excellent first quarter for many of the oil majors despite BP’s first loss in 20 years. Although the FT’s Lex column  was quick to criticise the lack of ‘creativity’ shown by the majors is addressing the longer term threats to their business model simply summarised as declining reserves.

It was this threat that was well in evidence in the results of PFC Energy’s annual Top 50 energy company ‘league table’, which was perhaps notable most for the state owned companies not on the list. This list is compiled based upon market capitalisation of listed organisations, but the many NOCs missed off the list are the power brokers of the industry and it seems somewhat incomplete without them.

The Tip of the Iceberg

This is especially true in light of BP’s recently inked deal with Rosneft. Of course the AAR consortium will do all it can to ensure that this deal never sees the light of dayas it seeks to protect its investment in TNK-BP, however, assuming this does go through this will provide an example of one of the more creative ways that IOCs will be directing their strategies in moving forward (remembering my earlier reference to Lex). Unfortunately though this sort of investment represents a communications challenge on the same sort of scale as the Gulf of Mexico spill that BP struggled through last year. Exploring the Russian arctic is certain to redraw battle lines with environmental activists and a wide range of stakeholders that believe this represents an unacceptable risk. I saw Bruce Parry’s programme last night about the impact of the Alberta Oil Sands on the lives indigenous people of that region. I expect there to be many similar programmes in the future and BP will no doubt be making preparations for reputational fallout, or so we hope.

Wakey, Wakey!

BP also took the limelight with its recent release of its 20 year outlook , an annual event, which has been closely watched by the industry for years. The results as you may expect are not wholly surprising, but I did find Bob Dudley’s frank response to projections on the reduction of carbon emissions refreshing. “Overall, for me personally, it is a wake-up call”, is how he referred to the less optimistic view of political commitment to reducing emissions. What this means for BP’s policies remains to be seen.

In light of the EU carbon trading debacle and the reported €30 million plus theft that is alleged to have taken place, BP’s pessimistic projections are looking fairly accurate. The system for trading credits remains down, with no immediate end in sight. For a trading platform to work traders need liquidity and trust. Both have been killed off and will take a long time and a lot of cost to rebuild. Industry calls to speed up the process of creating a single platform for Europe have so far not generated any concessions. Based on the performance of the UK trading platform, which appears to have far better standards of governance and compliance than some of its European peers, London may prove a popular home for the EU system.  

Pumped Up Prices

The retail sector in the UK has also been the subject of many headlines since the start of the year as prices at the fuel pump and retail electricity and gas prices have also risen. It will be interesting to see whether an OFGEM price review will yield any results (unlike previous inquiries) and if the Chancellor will capitulate and halt plans to raise fuel duty. The Coalition government has since Q4 GDP figures were released (and to some extent beforehand) been challenged to unveil plans to support economic growth and this duty may well have to be conceded if there are no specific policies in the pipeline.

Egypt

Finally would like to sign off this post by wishing that our friends, colleagues and clients in Egypt stay safe in these troubled times.

Amid concerns that energy companies are enjoying widening profit margins at the expense of their customers, Ofgem has announced that it will launch a review into the retail energy market.

With British Gas, Scottish and Southern Energy, and Scottish power all announcing price hikes in recent weeks, resentment has been growing as many home owners struggle in a difficult economic climate.

This Tweet sums up the general feeling nicely:

While many have welcomed Ofgem’s decision, there has also been significant scepticism in terms of what the review will mean in reality. In truth, this is not the first time that the market has been investigated in this manner, and as a spokesperson for Energy UK said today:

“The review is the latest in a long line of investigations into the energy market in recent years and no previous investigation has found anything to concern the competition authorities.”

While Sara Vaughan, head of energy policy at Eon, today heralded the beginning of a new era of ‘interactive relationships’ between energy companies and their customers, consumer groups are more sceptical.

As Adam Scorer of Consumer Watchdog pointedly stated, energy companiues “do not feel the hot breath of competition on their necks”. With the market closed to new entrants as a result of the dominance of the ‘big six’, market structure rather than conspiracy and cartels seem to be to blame for consumers’ current predicament.

If this is the case, then Ofgem’s investigation will merely provide lip service to the public’s bitterness, and could ultimately prove a further irritation rather than a solution. Watch this space.

A commitment to deliver an annual energy statement ‘to set strategic energy policy and guide investment’ was a key plank of the coalition government’s energy policy. In a flurry of new consultations, calls for evidence and publications, the first statement was delivered today.

The final day before the start of the summer parliamentary recess would be the perfect occasion to rehash and reannounce old initiatives – so is that what has happened, or am I being over-cynical?

Well, there are certainly some elements that we have heard before – for example a review of the role of Ofgem, and a drive to greater transparency in consumer energy billing have both been hinted at in recent months. That said, the additional level of detail and timelines announced today are both new and very welcome.

Both of the above will certainly generate coverage tomorrow, as will the genuinely new announcements, such as the initiative to identify additional CCS projects worthy of public sector investment.

And of course, all of the detail announced today contributes to creating a more stable environment for investment in the energy sector, stability which is desperately needed in both the newer and more ’traditional’ energy sectors at the moment.  

The mixture of more detail on existing policy, together with some completely new initiatives, seems a good one. Too much of either would not be credible. Here’s hoping that future statements follow the start made today.

This morning I attended a breakfast briefing with Alistair Buchanan CBE, the Chief Executive of Ofgem. As I took my seat and glanced at the title of the briefing – ‘Keeping Britain’s lights on: the challenges’ – I began thinking about the great wave of anxiety that is sweeping through the energy sector.

The roots of the current concerns are varied and wide-ranging. While consumers shudder at the threat of rising energy bills, CEOs of large energy companies are increasingly at pains to convince key stakeholders that they hold the key to powering the future. Nonetheless, to my mind, the overarching concern surrounding the sector has shifted in recent months. Column inches that were previously filled with talk of Copenhagen and the impending destruction of the world as we know it are now discussing the crisis of energy security that apparently sits just around the corner.

Judging by the outlook of the recently released coalition agreement, the new Government is equally preoccupied by the idea of Britain’s lights going out. And so they should be. A combination of the financial crisis, the breakdown in carbon trading, and Britain’s changing world status in terms of gas supply has dramatically increased the chances that the lights will indeed start flickering.

Buried in this ongoing conversation about energy is an issue that strikes at the heart of concerns about supply, and has only recently started to raise its head; it is being reported that a genuine shortage of suitably qualified personnel exists in the UK capable of staffing the new era of power generation.

Crammed into a busy train carriage last weekend, I flicked through a special supplement in The Sunday Times’ on future energy skills. In it, Alan Copps discussed a recent report that was commissioned by the government and revealed 200,000 new engineers are likely to be needed in the next 5-years, expressing grave doubts as to whether companies will be able to find suitably qualified candidates. On top of this, the CBI recently found that teachers view engineering as for ‘the less academic’ (unbelievable since I genuinely can’t remember ever seeing an engineering student without their head buried in a book at uni!), while parents consider it a ‘dying industry’. What’s more, clean energy companies are facing an uphill struggle to compete for talent with the oil and gas industry, which regularly offer three times the salaries.

Perception is everything, and as I consider my friends and family views on the energy sector, I can appreciate how graduates are put off entering an industry that is often regarded as uninspiring and dull. Having said that, clean energy and environmental engineering really do present enormously exciting opportunities for future careers; marketing these opportunities to an increasingly environmentally-aware generation of young people will be crucial. A failure to do this will leave us all in the dark. And then who will be on hand to turn the lights back on?