Energy Guides

Ovo Energy: ‘We launched in a recession and are working hard to keep costs down’

Thursday, 1 April 2010

By Daniel Barnes daniel@consumerchoices.co.uk

Ovo Energy is looking for 1 million electricity and gas customers with promises based on good value and slick service.

New kid on the block Ovo Energy weighed into the energy price war this spring. Rather than shaving a pound or two off its tariffs to get to the top of the price tables, it chopped the “big six” off at the legs with an online energy deal 23% cheaper than its rivals.

“There has been a good sized fall in wholesale prices and I’d love to think we are leading the way with more price cuts,” says Ovo Energy founder Stephen Fitzpatrick.

“We launched in a recession and work hard keep costs down,”

Ovo first appeared in September 2009, creating a splash by launching what was then the UK’s cheapest online dual fuel deal. This time, though, the people behind Ovo say they aren’t just here to ruffle the energy giants’ feathers, but to make promises to their customers, too.

“We are saying to customers we will not always be the cheapest, but our prices will always be as cheap as we can get them. When a customer reaches the end of a 12-month contract, they automatically go onto our cheapest deal.”

Fitzpatrick, a former senior vice president at investment bank JP Morgan, adds: “Our prices reflect the market rates. On 1 September on our launch we were the cheapest and we are there again.

“There are now seven or eight online energy deals all around £6 of each other and then a big gap to us.”

The average best online dual fuels from the big six energy firms is now £906. Ovo Energy’s New Energy tariff now costs an average of £854.

Fitzpatrick explains: “It is our commitment to have fair prices and reflect our costs. Across the market there is a big difference in prices between online and paper billing. Our costs are not huge and our difference between online and paper billing is £20, because that reflects our costs.”

And why don’t the other firms cut prices?: “You’ll have to speak to them.”

Go green and get good service

Ovo may be head of the volatile domestic energy price league for now, but the firm is also looking to capture customers with its green credentials.

Ovo Energy offers two main tariffs, its New Energy Plan and the Green Energy Plan.

The Green Energy Plan offers 100% of its electricity from renewable sources and the New Energy Plan has 15% renewable energy, the highest level across the market for standard energy plans.

Around 1 in 6 of Ovo Energy’s customers have now signed up to the firm’s renewable energy packages.

“Our aim was to provide renewable energy for everyone by making it cheap by being efficient,” Mr Fitzpatrick explains.

“This is how people can do their bit and not pay a premium. Even our 100% green energy is the third or fourth cheapest package across all deals.”

Service is also a key to Ovo’s offering. Fitzpatrick says his experience of poor service at the hands of the major providers was one reason he took up the challenge to establish an energy company.

“We are a new company and we need to keep on our toes. We value every customer and I hope we will always stay fresh,” he says.

“We have a 0800 number and our staff don’t have scripts to follow except the legal details when signing people up.”

He adds the firm was not pushing customers to deal with the company only online to cut costs: “Sometimes it is more efficient to solve a problem first time on the phone. But other customers prefer to go online as it suits them.”

The future of Ovo

Ovo Energy is now looking establish a serious place in the energy market.

While British Gas supplies energy to around 9.3 million homes, Ovo Energy is aiming at one million customers over the next decade.

But the firm does not want to be part of the establishment and wants to stay on its toes.

“I hope we won’t become part of a ‘big seven’,” says Fitzpatrick, whose plans for Ovo include starting to generate its own energy.

“We are ambitious and realistic, but we don’t want to be just another energy company, I hope remain always new.”