Auto-switching: A cure for consumer inertia?

The Energy White Paper’s suggestion that in future customers could be automatically switched to cheaper deals has been met with warnings about unintended consequences. But Citizens Advice’s Elizabeth Blakelock tells Utility Week she believes it has the potential to break down consumer concerns about switching and boost engagement. She outlines her view on this, how retailers can create smoother customer journeys and her thoughts on how to achieve a just transition.

With a sunset clause ensuring the end of the default price cap in 2023, there is still no clear indication of how it will be removed and what will replace it.

Through the Energy White Paper, the government professed its support for competition as “the most effective and sustainable way to keep prices low for all consumers over the long-term”. It went on to propose a framework for automatic switching for customers who do not opt out and would have otherwise been rolled over onto a default tariff when their current deal ends.

There have been concerns expressed in some parts of the industry that this approach is out of step with the wider decarbonisation debate and could have unintended consequences, in terms of making consumers more passive participants in the energy system.

However, Elizabeth Blakelock, principal policy manager at Citizens Advice, tells Utility Week she takes the opposite view.

“Opt-out switching is a really exciting idea to explore, about how you make sure people are benefiting from the market. We set out in an options paper the pros and cons. A lot of cons around opt-out switching are around logistics – the challenge of moving that number of accounts between suppliers”, she says.

The options paper When the Cap No Longer Fits explores the issue of protecting consumers once the price cap comes to an end, with mass opt-out collective switching being one such option.

Progressively auctioning off the accounts of disengaged customers should, the paper argues, deliver good price outcomes for eligible consumers. The large number of participants in the market should, subject to auction design, lead to a “high degree of competition for new accounts, driving good prices”.

Such a solution could be potentially quite scalable. For example, it could start off by only auctioning the very long-term disengaged, and then widen if early results are positive, the paper suggests.

Yet weaknesses highlighted by the report include concerns that if auctions deliver good prices, they may undermine incentives on consumers to shop around for themselves. Furthermore, without explicit consumer engagement the industry does not know what they want, and there may be legitimate good reasons why consumers are happy with their current supplier.

However, Blakelock says: “It may be that if people were regularly switching and have a good experience multiple times because they’re doing the opt out switch, that they become familiar with switching and are more likely to do so. We don’t have the evidence for that but it might be that any worries about switching could be alleviated.

“We certainly know that people are put off switching again in the future after a bad experience. Perhaps I can speculate that after a good experience they might be more likely to engage? When we lay out these options one of the important strengths of the model is that it should deliver a good price outcome, and the number of people would massively increase.”

Smoothing out the customer journey

As Citizens Advice’s principal policy manager, Blakelock knows all too well the massive impact Covid has had on consumers. The pandemic has plunged households who have never before been considered vulnerable into debt with their energy supplier.

“People are really worried. Whatever topic they’re getting in touch with us or their supplier about, there is a real heightened anxiety”, she says.

Against the backdrop of a global pandemic, Blakelock reveals her thoughts on how companies can better manage vulnerable consumers. Covid-related customer confusion is one of many areas of worry thrown up by the crisis.

She believes companies need to ensure there is a clarity around how to actually access the help available to those in need, to improve the customer journey.

“The bad practice from suppliers is not considering the journey, how people can get from asking for help to actually getting it”, she says.

This, says Blakelock, became especially evident during the first lockdown when customers with genuine reasons for contacting their supplier became confused when automated messages informed them the retailer was only accepting calls in emergency cases.

“The customer had interpreted that as there was a fire, or gas safety risk, they hadn’t actually said what an emergency case would include”, she explains.

She adds the charity has seen cases where a lack of internet access has resulted in customers struggling to access the warm home discount due to suppliers attempting to sign up eligible consumers online, highlighting the need for an omnichannel approach with the option of telephone services.

“If you think about an ability to pay conversation, the way that you’re interacting there, the kind of questions you need to pose as a supplier to understand someone’s circumstances, that to me does lend itself very well to voice, or an interaction at least”, says Blakelock.

Building inclusivity into the heart of the energy transition

With less than 30 years until the UK has to meet the 2050 target, thoughts have turned to the monumental changes ahead for the energy sector. Mass decarbonisation will lead to the widespread use of technologies such as electric vehicles, battery storage and home power generation. One concern raised by the sector is that of ensuring it has a ‘just transition’.

Ultimately for Blakelock, inclusivity needs to be built into the energy transition.

“It’s absolutely vital, so core to this transition that it is inclusive by design. That we do not develop a set of processes, products and regulatory frameworks that work for some theoretical average individual or set of consumers”, says Blakelock.

She adds: “It has to be that the understanding of individuals and how quickly people’s lives can change are locked in right from the start. So that means things like accessibility standards are understood by people who are developing new products and business models.

“It means that people in all of the different demographics and status of their lives are understood by the people of designing of these regulatory and government frameworks so there is never this strange distinction between a theoretical average consumer and some other people that we might call consumers in vulnerable circumstances.”