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Risk reduction for domestic customers
The idea was initially sparked by conversations with customers worried about rising oil prices and hefty winter fuel bills.
“Top of the customers’ wish list was cheaper kerosene, next was being able to avoid the unknown when it came to winter fuel bills,” said managing director Chris Bingham. “Whilst we couldn’t affect a change to the former due to the many variables that control the price of oil, we felt we were in a position to do something about the latter. Having assisted commercial customers with their annual fuel needs via hedging, we looked at a version to suit our domestic customers.”
Having a technology background, enabled Chris to build an online platform and start testing Oil Price Protect in selected areas in April last year. Checking with the FPS to ensure that the scheme met the criteria for the Code of Practice, over the last six months the scheme has been ‘tested to death’ reports Chris.
To get an Oil Price Protect quote, a customer simply enters their postcode, email address and yearly kerosene consumption. An annual fixed price is then sent to the customer within 5-6 minutes. Prices do vary slightly across the UK given distances. There are payment options and customers paying the annual cost upfront receive a discount. Fuel is then delivered as and when required throughout the year.
Trials, feedback and going live
“Before going live we wanted to be sure that the back end system could cope. The trial also gave us the opportunity to get valuable feedback which in turn helped us refine the offering now launched. To date 95% of those who took part in the trial have signed up to continue buying their kerosene through Oil Price Protect,” said Chris.
“Prior to Oil Price Protect, like most other distributors, we did offer different ways to pay including direct debit. Customers told us that in common with other utility bills, they were alarmed when direct debits suddenly shot up. Our customers wanted more control – a pensioner on a fixed income feels more secure knowing exactly what they have to pay as does a family on a tight budget. People don’t get excited by the oil price falling but they do get scared when the price keeps rising. A fixed price may be slightly more expensive but it is good value if you want or need price protection.”
Following the trial, all Craggs Energy’s domestic customers have received a letter explaining the benefits of Oil Price Protect. Picked up by the national media, Chris has recently spoken about the scheme on local radio stations in Yorkshire, Lancashire, Scotland and Cambridgeshire.
Extending Oil Price Protect
Not only are Craggs Energy’s own domestic customers able to gain peace of mind, so are those of its partner distributors nationwide.
“It’s still very early days but we’re encouraged by the response. Yes, it’s more expensive than today’s spot price but the reality is that no one can really get cheap fuel in the winter; but fixing the price does give customers peace of mind.
Although we expect the scheme to be relatively low key this year, we’re looking for more mutually beneficial partnerships to spread the scheme.
“We do get asked about what happens if the price falls; the answer to that is don’t fix your price. But if a domestic customer is worried about the oil price rising, it makes sense to fix the price for 12 months in advance. There’s no more shopping around, fixed payments can be spread throughout the year and if the price did go up in winter, they’re protected,” added Chris.