Utilities bow under pressure to invest in IT
UK utilities are set to invest over #1.6 billion in IT systems by 2002, up 43 per cent from this year's expenditure, as they respond to mounting competitive pressures.
According to a report from market researchers Datamonitor, utilities must place greater emphasis on the use of IT in order to support their business as they face complete deregulation of their markets. One energy supplier, Centrica, described the situation as 'the most significant and fundamental period of change that utilities have ever faced'.
The task ahead is formidable. Utilities will be forced to create IT systems to support a market of multiple companies, in which domestic customers can change supplier every six months. This is an 'enormous challenge, the equivalent of creating a bank cheque clearing system from scratch', said a representative at Electricity Association.
The electricity sector, which accounts for 43 per cent of the utilities' total IT spend, is likely to remain the biggest investor as it prepares for competition next April. The Electricity Association stressed the need for flexibility as well as capacity in new systems to cope with customer upset.
The gas market, which has been operating competitively since April 1996, faces fresh challenges now as other energy companies, including regional electricity operators, look to incorporate gas supply into their services.
Some operators are more advanced with their systems than others. Centrica's claimed that most of its systems work has been completed, following a large-scale programme that cost #150 million in 1996. It aims to compete in both the gas and electricity markets.
'Obviously, there will be some ongoing work, but the majority of systems are there, enabling us achieve our goal of becoming the UK's number one energy supplier,' said a Centrica representative.
The report also highlighted the growing importance that utilities attach to customer care. It estimated that over half of the combined IT spend in 1997 will be on systems control functions such as call centres and usage monitoring.