Launching EB Insights™
22.08.2019 | Author: Ilse Melotte
Ask a CFO of an energy supplier if Gross Margins have ever been actually and absolutely ‘risk proofed’ and he/she is likely to have a good laugh. Selling energy comes with risks – both internal and external. And all of them cannot be mitigated. Risks coming from erroneous figures not only have
the potential to cause serious financial damage (for instance from management taking wrong decisions), but also can cause irreparable damage to a company’s reputation.
As a independant company NrgFin has been working across different utility markets, providing market and customer tailored advice and solutions for informed decision making and operations by excellence. Our former platform Livello was launched in 2016 with the initial goal to help energy suppliers to identify and manage some specific market and settlement risks. Like many other consulting firms, our initial plan centered on developing a series of tools to support our advisory services.
All this experience has now been centralized in EB Insights™, an ideal and proprietary methodology and toolset for guiding retailers in local utility markets towards high functioning. It is designed to help energy suppliers businesses establish, assess and enhance their operational and financial risks and performance monitoring.
What is EB Insights™ about?
“EB” stands for Energy Balance, the driving force behind the energy suppliers’ operating model and therefore the basis behind their Risk and Performance Measurement system. It’s a process, effected by the energy supplier’s management and personnel, designed to provide assurance of the achievement of the objectives in the following categories:
- The effectiveness and efficiency of retail business operations
- Reliability of the gross margin reporting
- Compliance with energy market applicable laws and regulations
EB Insights™ is a multi-layered framework and methodology that supports improved decision making based on the principles of Managing for Value. The breakdown looks as follows:
- EB Insights™ Domains and Processes
- EB Insights™ Objectives
- EB Insights™ Definitions
- EB Insights™ Functionalities
- EB Insights™ Assertions
- EB Insights™ Axes of Measurement
- EB Insights™ Dimensions
- EB Insights™ Life Time Value
- EB Insights™ Data Model
Alignment, a source of economic value
We all know that value creation is the result of customer contributed value plus enterprise contributed value. EB Insights™ introduces the concept of Customer Total Value (CTV) which is the combination of:
- Customer lifetime value (CLV): a prediction of the net profit attributed to the entire future relationship with a customer.
- Customer Profitability (CP): the difference between the revenues and the costs associated with the customer relationship during a specified period in the past.
Where CP measures the past and the short term future, CLV looks more forward and is therefore useful in shaping managers’ decisions when focusing on economic value creation. It represents an upper limit on spending to acquire new customers. But the ultimate purpose of the CLV metric is to assess the financial value of each customer.