Question: Why do none of the big UK energy companies offer 'energy services'?

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 1 Aug 2008 12:59 UTCFri 1 Aug 2008 - 12:59 pm UTC 

In theory, energy suppliers could bill domestic customers for energy and energy savings. Or to keep your home at a given temperature. This is known as 'energy services' or Energy Service Companies (ESCOs). The regulator, Ofgem, say on their site they'd encourage energy services. But no one seems to do it. Why? Are there in other countries?

I know already that there are energy service companies operating in new developments, e.g. where they're built the whole energy system in a neighbourhood. Clearly offering the same kind of service to individual domestic consumers is much more complex, but it still seems strange that no one is doing it.

I'm not sure how to price this. If you want to give me an initial answer with an indication of what you could do with more time, I'm happy to have guidance.





 1 Aug 2008 15:41 UTCFri 1 Aug 2008 - 3:41 pm UTC 

Just a free comment:

Isn't there a contradiction of interests in:
"In theory, energy suppliers could bill domestic customers for energy and
energy savings."

No energy supplier is going to come out and say it is against energy saving, but energy saving reduces its earnings from its primary activity.

Energy Service Companies help plan projects to reduce energy use.

It is, however, interesting that this site:
has a link to Chevron:

Click on the red "more" in the middle column for additonal information.

Being an old cynic, I have to wonder if Chevron Energy's guaranteed minimum saving on a project is that which an independent Energy Saving Company could achieve.

I will be interested, however, to see comments or an answer that rebutt my feeling.



David Sarokin 


 1 Aug 2008 15:59 UTCFri 1 Aug 2008 - 3:59 pm UTC 


I'm familiar with the 'services' concept you describe as a way of reducing resource demands.

For instance, car companies used to buy paint from paint companies, and the latter had a clear incentive to sell as much paint as they could. 

Now, many car companies contract with the same paint companies for 'paint services' whereby the paint company gets paid a set fee for each car painted.  Under this arrangement, the paint companies have an incentive to use as little paint as possible. 

It's always a challenge to say why companies don't do a particular thing.  But the services concept generally entails an intimate relationship between the parties involved.  That is, the paint guys have to more or less live in the auto plant for a while in order to work out the service details. 

I'm not sure how many consumers want their energy companies more or less living in their house.  There are many companies providing home energy audits, though, which is a step in the services direction.

Does that help at all?





 1 Aug 2008 16:30 UTCFri 1 Aug 2008 - 4:30 pm UTC 

Thank you for these helpful comments.

David - I think you have a fair point. This would clearly require some kind of solution based on a less close relationship. The kind of model I have heard people talk about, but never seen implemented, is that an energy company would spend x amount installing insulation in a home. This would result in lower energy bills for the customer. However, the company would add a charge for 'energy services', effectively splitting the saving with the customer. Because the company has to buy less wholesale energy, they would actually make more money, while the customer also saves money. Of course a contract to buy energy from the company for a given amount of time would be a pre-requisite.

I don't know if you're based in the UK, but the big news today is talk of a windfall tax on energy companies. There is therefore significant incentive to avoid this, even if it means selling a bit less energy.

Incidentally, I'm more broadly looking for intersting things energy companies anywhere have done to help/improve their image/build loyalty with customers. Links to an energy company outside the UK which is doing something interesting would help too. Something along these lines, submitted as an answer, could definitely get the bounty on this question.

Thanks, and do feel free to ask more clarify questions. I'll try to respond more briefly in future!





 1 Aug 2008 22:47 UTCFri 1 Aug 2008 - 10:47 pm UTC 


I think understand the model now.  It seems that the Energy Service Company would become an intermediary for supplying energy after it had installed energy-saving measures (house insulation, better furnace, whatever).
The problem  - as I see it -  is that this involves a significant upfront investment that has to be recouped over many years, i.e., a long term contract with the home owner, locking him in to buy the energy only from the company, as you point out.

This is hardly a viable arrangement; to achieve the the savings necessary to recoup the investment, the contract would have to be for 20 or 30 years, longer than most homes are owned, plus the vagaries of the energy prices and the problem of assuring that the customer adheres to the contract. 
Banks will enter such a contract because the mortgage gives them control of the property (but as we now know, they also can get it very wrong).

As to the windfall tax, what I have just read on the web suggests that it is not a good idea, a politicians' populist, knee-jerk response.

Your restatement of your question looks more likely to find an answer.

Clarifications help get the right answer.  I hope a Researcher finds it.





 7 Aug 2008 00:59 UTCThu 7 Aug 2008 - 12:59 am UTC 

Just a comment: In places like Manitoba, Canada with cheap hydro-electricity, the electric companies do try to get locals to reduce usage of electricity because they can then sell the excess at much higher rates to people outside of the province. They do pay people to improve their homes and have public awareness campaigns to lower electricity usage as the company does better with lower local usage.


David Sarokin 


 10 Aug 2008 03:27 UTCSun 10 Aug 2008 - 3:27 am UTC 


Although not set up like you speculated in your original question, there actually are quite a number of 'energy services' provided by power companies -- that is, services designed to get customers to use less energy.

For instance, many companies offer free energy audits, rebates for energy-saving purchases, grants for alternative energy systems, and so on.

A description of many of the available programs in the US can be found at this site:

Look, in particular, at the Featured Incentives in the left-most column.

Are these the sorts of energy services you had in mind?





 10 Aug 2008 12:40 UTCSun 10 Aug 2008 - 12:40 pm UTC 

Many thanks for all the helpful comments on this one. Have been really impressed at the quality of comments, and particularly that no one has submitted them as an answer. Sadly time has now run out and Iºm cancelling the question. Iºll be sure to use Uclue again in the future.
Daniel Kirk




 10 Aug 2008 12:41 UTCSun 10 Aug 2008 - 12:41 pm UTC 

As per my last comment, sadly didnºt get an exact answer, but really impressed by the comments.


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