Flick Electric Co: Putting power in the hands of the people

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Electricity is usually in the hands of the big guys, but this small venture from Wellington is putting power back in the hands of consumers and helping us little guys give fixed electricity prices the final flick.

Harnessing the potential of metering technology, they’re disrupting the traditional sales model and giving greater transparency behind usage and pricing.

Flick Electric Co, which is so far available only in New Zealand but with not too distant dreams of coming to Australia, is the first power company offering time-of-day pricing based on the electricity spot price. This means consumers and businesses pay the actual cost of power as it changes throughout the day.

There about five big vertically-integrated retailers in New Zealand who generate the electricity at one end and then retail it at the other end. They’re used to selling most of their energy to themselves at a fixed price and then just telling the customer how much they’re going to pay on a singular basis. Flick’s model has driven right through that and the team actually want all of their customers using smart tech, allowing the customers direct access to all those wholesale costs through the chain to their benefit.

How they got started

Kochie’s Business Builders sat down with Flick’s chief executive Steve O’Connor to find out just how the company managed to pull off such a tremendous feat.

No one just wakes up out and decides that it is the perfect day to start a business selling electricity. That’s a big undertaking! Luckily, for the founders of Flick they had a background in the industry and so knowing it inside out helped them get a sense of whether their idea and business model could work.

“There’s some inherent barriers to entry, probably, you’d say, or very, very significant hurdles. We kind of knew the industry well and we thought we knew what the opportunity was. Then for the six of us, we were just at a point in our lives where we had a bit of cash and we’d been doing some entrepreneurial stuff, and decided actually we think this is a really smart thing for us to have a crack at,” explained O’Connor.

Stages of evolution

First they asked themselves a million questions, “What would be the challenges that we face to get something to market? Does the business model mean we can actually make money and deliver a value proposition for customers? What would a minimum viable product look like and how long would it take us to build it? Then what kind of capital runway and people capability would we need to build a business that could be successful?”

Finally, after three months they made their decision to go for it and threw all their cash at the idea. With the help of a development team they worked to build a viable product.

“That took about five to six months to build and then we took on some pilot customers to really start testing it. Get their views on how they found the experience, whether it was delivering value to them, what problems would this solve and what other problems they thought we could solve. Getting used to trading in the market, so actually being active in the market and meeting our obligations in market. All these hard things that we had to do.”

They piloted from January 2014 through until August when they made the decision to launch. They soft-launched in Wellington first and started expanding out across New Zealand since then.

“To give you an idea, in 2015, so we started to scale the business. In 2015 our growth was 37 percent month on month compounding average growth, which is great. We’re typically taking on thousands of customers now and in fairly quick fashion, which is cool. It’s exciting.”

How it works

During a day, the cost of power fluctuates considerably depending on supply and demand. Smart meters have been around for awhile now but retailers have done very little to take advantage of the technology and pass savings onto consumers. Rather they offer a one-size fits all flat rate.

“Our view is there’s so much opportunity to offer energy customers a much better product and service, so we think we’re on fertile ground disrupting the existing energy model,” said O’Connor.

Flick’s technology allows consumers to be billed per half-hour segment, according to how much generators and transmission companies are charging at that particular time. Using their simple free app, it’s easy to log in to see the real-time cost of the power.

“Most energy companies receive a bunch of costs that relate to the generation of the energy, and moving it around, and getting it to your door. They absorb those and they charge a single price, and what we’re doing is completely unbundling that for the first time. The customer problems we’re trying to solve are reasonably fundamental ones. The first one is trust. Is the price a fair price and a reasonable price? In New Zealand we’ve faced 75 percent price increases in the last 10 years. Oz is very similar. Why is that? Surely technology’s getting better for generating it and getting it to our door. Why is it getting more expensive?” he explained.

By completely unbundling the cost and supply of energy Flick customers get the exact cost of generation on the wholesale market. Flick then charges separately for the first time for being the retailer.

“The first thing is transparency, which, to our customers, they’re looking and going, “No, I’m getting a fair deal. I can see what Flick’s charging for its function in the industry of looking after me as the retailer and then I know I get everything else at extra cost.” If the price does go up they can see exactly who put the price up for the first time. Rather than having a retailer go, “Oh yeah, prices are going up,” and everyone’s like, “Why? Can someone tell me why prices are going up?” If they see that now, if that happens now with us, they see exactly who’s putting up the price.”

The flat rate that a traditional retail will charge you is round $0.25 per kilowatt hour, but Flick customers overnight are paying about $0.08. That’s about a third of the price.

O’Connor explained that through transparency they are encouraging easy behavioural changes to help consumers become more conscious about their consumption. Individuals and businesses can use Flick’s online tools to understand their consumption and change their behaviour to make huge savings.

“Your dishwasher. Why put it on at 7PM when you’ve finished your meal? Because that’s typically a peak price. Why not put it on when you go to bed at 11PM when the price is really cheap, for example.”

“Our customers love it because it’s transparent. They get really neat digital tools that informs them about their consumption and that’s lots of things, like most people don’t know how much it costs them to power their house for a day.”

Do you know how much it costs you to power your home for a day?

Speaking for myself I can say I’m completely ‘in the dark’ when it comes to understand my daily energy costs. This is what Flick is really passionate about changing and with their help it’s no wonder people are getting excited to know more about their usage. 

“For our customers, when we break it down into these bite-size bits of information for them and the digital tools we provide, they start looking at that, they go, “$4.80. Shit that’s like a cup of coffee. Actually that’s really good value,” and they start loving the product again, and the experience and all the rest of it.”

“I think that’s the last bit is that we’re giving them much more control, which they felt like they’ve never had because ultimately as consumers, at least historically, we’ve been product-takers. We’ve been price-takers and we’ve been service-takers, and we’ve never really had any choice. What we’re giving customers ultimately is real choice again around when they consume, the decisions they make for their consumption and how much they can pay for their energy based on that.”

“It’s certainly different. It’s proving to be  really appealing to our customers and as a consequence is probably quite disruptive to our industry and the big players.”

Chloe Potvin
Chloe Potvin is a contributing small business writer for Kochie's Business Builders.

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