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What Energy Companies should do to handle Rising Energy Prices

What Energy Companies should do to handle Rising Energy Prices

Europe is facing an almost unprecedented energy crisis. Consider the following statistics:

  1. Energy prices have hit record highs in recent months, increasing over 40 percentage points in just two years.
Source: eurostat
  1. Allianz estimates that this year’s average household energy bill will amount to €3,400 in Germany, over €3,000 in the UK, €2,800 in France, and just under €2,000 in Italy and Spain.
Source: Allianz Research
  1. To limit the impact that these price rises will have on its citizens, Germany will need to pour in state support measures amounting to €20BN, the UK €14BN, €17BN in France, and near €10BN in Italy and Spain.

Unfortunately, many Europeans will likely soon fall into arrears of their energy bills. Energy companies must act quickly, implementing innovative customer-centric debt recovery strategies to recover what they’re owed. This will limit the damage—both to their company’s bottom line and to consumers’ credit scores. 

Let’s explore three ways energy companies can handle this drastic increase in prices. 

3 major reasons behind the increased energy prices

The COVID-19 pandemic, extreme weather conditions, and war between Russia and Ukraine have all played their part in causing energy prices to go through the roof. 

When the pandemic initially hit, societies ground to a halt. The demand for energy decreased, which led to a decrease in supply. But when economies began opening back up, there wasn’t enough supply to serve this sudden rise in demand.  

What’s more, Europe suffered a particularly cold winter in 2020/21 which ate into existing gas supplies. This was then followed by a windless summer in 2021 that decreased wind energy production, further hampering the total energy supply. 

Lastly, Russia’s invasion of Ukraine has played a major role in the recent price increases. As a leading producer and exporter of both natural gas, Russia has wreaked havoc on the markets by suggesting it might restrict supplies in response to Western sanctions. 

How can energy companies cope with rising energy prices?

  1. Examine balance sheets carefully before restructuring the organisation to cut down unnecessary expenses

While the increase in energy prices hits consumers the hardest, energy companies are also heavily affected. To survive this period, companies need to ensure they’re as agile and lean as possible, reducing all unnecessary expenses.

They need to carefully analyse their current balance sheets and identify opportunities for potential cost savings. Perhaps they might even have to lay off staff as they seek to maintain productivity while minimising salaried expenditure, though this should be a last resort. 

Such measures might appear drastic—but they’re critical if energy companies want to make it through the year. Estimates suggest that as many as 60 UK-based energy providers alone will go bust this year, proving just how important it is for energy companies to make themselves as lean as possible. 

  1. Increase cash flow by leveraging collections management software

Even before this crisis hit, 12 million European households were in arrears of their utility bills, while 80 million Europeans struggled to warm their homes adequately. Therefore, energy companies need to revamp their collections strategies to address this critical challenge. 

The quickest way is to implement collections management software. These solutions allow energy companies to easily chase up more debts with fewer employees. Collections management software provides collections professionals with a single source of truth for their dunning operations. Collections agents can create, modify, send, and analyse the performance of their dunning messages from an all-in-one portal. 

For example, collections managers can access key behavioural insights and dig into consumers’ financial history. This allows them to identify risky customers at an early stage. Thus, they can take proactive action, sending personalised dunning messages to prevent high-risk accounts from further falling into arrears. By leveraging AI and machine learning (ML), they can automatically optimise their strategy on an ongoing basis to increase results while minimising manual effort. 

  1. Apply customer-centric dunning approaches 

Consumers are struggling to pay their bills—and aggressive dunning strategies will only make things worse, not better. Energy companies need to focus on being as customer-centric as possible, making it as easy as possible for their customers to pay back what they owe.

Collections team should personalise dunning approaches instead of adopting generic, one-size-fits-all strategies. They should segment customers into different categories before A/B testing which channels, designs, messaging strategies, or timeframe each segment prefers. Collections departments can then use these insights to optimise and tweak their strategy going forward.

Collections teams can also encourage customers to resolve their debts on a self-service landing page and let customers schedule payment plans based on their financial situation. By giving them full control over repaying their debt, and sparing them the awkward situation of having to speak to a collections agent, repayment rates will drastically increase.

Protect your customers to protect your company

The energy crisis is heavily impacting both consumers and energy providers. 

Energy providers must carefully examine their balance sheets to ensure they are operating as efficiently and cost-effectively as possible. Leveraging collections management software allows collections departments to identify high-risk accounts, take swift action, and adopt data-driven dunning strategies at scale. 

Lastly, collections teams should adopt a customer-centric approach at all times. While it’s tempting for energy companies to double down on aggressive dunning strategies to protect themselves in the short term, this is a poor strategy that will likely fail going forward.

Author
receeve
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