A dark day for energy

The explosive accusations about the behaviour of British Gas contractors and Ofgem’s damning review of customer service standards across the retail sector, contrasted with Shell’s admission of eye-watering profits, made for a dismal day for energy. Utility Week editor James Wallin discusses what this means for the industry’s long-term reputation, the debate over prepayment meter (PPM) customers and the role of regulation.

Turning energy retailers into the pantomime villains of the cost of living crisis has been a common trope of politicians, regulators and the media over the past year. It is a practice Utility Week has always argued is unfair and unhelpful.

But if you were to dream up a bad guy for these grim times you would be hard pressed to beat the apparent reality of a man called Alfonso.

The Times’ jaw-dropping undercover investigation into the practices employed by debt collection agency Arvato Financial Solutions, operating on behalf of British Gas, was littered with references to this particular operative. The comments attributed to him show the very worst of humanity: Callous. Materialistic. Borderline sadistic. His alleged comment that “You’ll have to literally like murder someone in this job to get in trouble” will haunt the retail sector for years to come.

To be clear Alfonso is not an employee of British Gas (or any other retailer) but Chris O’Shea, the company’s chief executive has admitted he is “accountable” for this situation. And like it or not, the energy retail sector as a whole will be tainted by these appalling accusations.

One worrying detail was the incentive apparently offered to Arvato employees for force-fitting a prepayment meter (PPM). One industry insider told Utility Week this arrangement was not exclusive to Arvato and that the sector is still dogged by bad practices of the past. They pointed to the door-to-door selling scandals of a decade ago, adding: “It feels very much like – here we go again. Is this just the tip of the iceberg?” They added: “You’ve got to wait for a generation of directors to retire before that culture is completely eradicated”.

There is no doubt that the dramatic allegations in the Times investigation of PPM meters being forced on the most vulnerable of households, in one case with no way to top up beyond the £10 credit installed, have sent a chill wind through the industry.

For weeks the debate over a moratorium on forced PPM installations has been waging, with many suppliers and industry figures making the case that this is a nuanced debate and a ban in isolation would be a blunt tool. That argument now seems to be dead. Ofgem’s chief executive Jonathan Brearley has asked suppliers to pause the practice but many had already taken the initiative and enforced their own ban, clearly reasoning there is no longer an acceptable public defence for continuing.

This is a short-term reaction but the question of exactly how you deal with customers unable to pay their bills remains unanswered. The worrying accumulation of bad debt is not discussed widely enough and brushing it under the carpet is a foolish response. The issue of the cost to serve PPM customers is similarly ill-debated territory but to solve the underlying issues of today’s scandal we need to address the unintended consequences of past decisions. The real danger now is that the public perception of energy retailers will be so low that they will be frozen out from the debate. In the meantime, the chances of the government moving from its default position of demonising the industry to focusing on genuine reform of the market for the benefit of all seem much further away.

There would never be a good day for the loathsome actions described by the Times to come to light. But their appearance alongside the century-high profits announced by Shell and the damning verdict of Ofgem in its review of suppliers’ customer service standards truly make it a miserable day for energy. There is little point in saying Shell is looking to offload its loss-making supply arm or that Ofgem has accepted call centres are facing unprecedented volumes and complexity of calls. People won’t listen. Can you really blame them?

As we know, there are thousands of dedicated, caring employees across the sector who are doing their best in difficult circumstances. Retailers are strengthening their teams as fast as they can and frantically trying to prepare them for the difficult situations they will encounter. But quite clearly much of the industry is failing to provide the level of customer service the public demands.

So, what can be done? One vulnerability expert reminded Utility Week that while energy retailers may be in the spotlight, the same issues are being faced in financial service, councils and property among others. They pointed to the first of these sectors as one that can provide a model for energy, adding: “There has been a shift in mindset. The changes that are taking place now are being done for the benefit of the customer, not compliance. And that has happened because of a very clear steer from the regulator on how it expects companies to act – what their end goal actually is. I don’t see that from Ofgem.”

In a week when we have already discussed the “micro-management” of the sector by Ofgem and the government, the suggestion of more regulatory intervention may elicit groans.

However, with energy retailers bruised and battered by the headlines inflicted on them today, Ofgem has an opportunity to provide leadership. It can start by providing a clear stance on exactly what it wants retailers to do about customers racking up debt, where PPMs can play a role and how they are expected to respond to rapidly evolving definitions of vulnerability. If this dark day for energy accelerates answers to those questions, then at least some good will have come from it.