First Utility slams Ofgem plans for supplier communications rules

Regulator is wrong to “soften” its approach to regulating supplier communications with consumers, says independent energy company

Independent energy supplier First Utility has slammed Ofgem plans to reform the way it regulates how suppliers communicate with customers.

In response to an open letter from Ofgem, setting out its intentions, First Utility issued a statement saying the regulator is wrong to “soften” key regulations.

First Utility chief executive Ed Kamm said: “The reason why eight million UK households have been on the most expensive energy tariffs for more than three years, is in part because of a lack of transparency and engagement from the big six.

“We are concerned that removing certain license requirements could make the level of engagement even worse as big suppliers exploit the relaxation of the rules.”

In its open letter to the market, Ofgem said its plans for the regulation of supplier communications with customers reflected its commitment to more “principles-based” approach to regulation.

“We are committed to this regulatory approach, and consider it will provide consumers with comprehensive protection in a fast-changing market, promote innovation and competition and put responsibility firmly on suppliers to deliver positive consumer outcomes,” wrote Neil Barnes, Ofgem’s associate partner for consumers and competition.

In part, Ofgem’s intention to review the regulation of supplier communications is linked to the rise of smart energy technologies such as smart meters and demand-side pricing models. It said these are essential to enabling customers to take greater control of their energy use and to engage more closely with the market.

While the rise of these technologies means that Ofgem will need to update its protections for consumers, Barnes said that the regulator is aware that it must allow suppliers the flexibility to “find new and better ways of meeting these customer needs in the most efficient and engaging way possible”.

Ofgem has already started engaging with suppliers to understand which areas of regulation relating to communications with customer ought to change, and the letter acknowledged that there are “strong views” on this among suppliers.

Some of these reviews have been consolidated in a report published by Energy UK and this will form the basis for discussion at a workshop on 3 October which Ofgem said will be open to “all stakeholders”.

While Ofgem is keen to push forward with its principles-based approach to regulation, Barnes was clear in his letter that “there will continue to be areas where it is appropriate to retain prescriptive customer communications rules”.

He said: “These will be areas where we feel that there is only one acceptable way of doing things, where there is a clear minimum standard we expect to see, or where consistency is needed in order to deliver wider market objectives.”

Despite this reassurance however, First Utility’s Kamm remained concerned. He commented: “While we support Ofgem’s desire for innovation that is in the best interests of the customer, it is important that it doesn’t sacrifice the current regulations which are already having an impact such as the rules requiring firms to tell a customer when their fixed deal is ending.”

In response to First Utility’s concerns, an Ofgem spokesperson said: “We’re making changes to further strengthen protection for consumers, and make sure that suppliers treat customers fairly and present information in a clear accessible way.

“Experience shows us that detailed rules can become outdated or prone to loopholes. In contrast, overarching principles, such as ‘treating customers fairly’, can’t be easily sidestepped, making it easier for us to hold suppliers to account. To be clear, these are enforceable rules which help us take tough action for consumers, including securing over £40m in redress since 2016.  

“To best protect consumers, we will also continue to use detailed rules where it’s clearly appropriate.”