Ofgem proposes ‘reputational incentives’ for suppliers

Energy retailers could be required to “clearly display details” from a third party organisation of their customer service performance, as part of Ofgem’s proposals to improve standards and transparency.

Views are also being sought on proposals including the introduction of a dedicated phoneline for vulnerable customers, as well as new rules around tackling consumer debt.

Ofgem’s consultation also outlines a proposed overarching consumer standards framework, bringing together various regulatory activities which it said will “provide a more cohesive and holistic approach”.

It comes as research published by the regulator shows a significant drop in customer satisfaction with service from their energy supplier.

Data collected from Ofgem and Citizens Advice’s joint Consumer Perceptions in the Energy Market survey shows overall domestic consumer satisfaction decreased from 74% in Q4 2018 to 66% in Q4 2022.

Ofgem has further identified concerns around the ease of contacting suppliers, as well as suppliers identifying and supporting/advising struggling customers.

Of those consumers who had recently contacted their supplier, it said, the percentage of those who reported that it was very or fairly easy to contact gradually dropped from 73% to 58% between Q4 2018 and Q4 2022 respectively. Meanwhile, those who reported it as difficult doubled from 13% to 26%

One of the regulator’s solutions is to “test and trial forms of reputational incentives” as a “first step towards developing more substantial longer-term incentive options”.

To this end, the regulator is proposing to introduce a new rule which would require retailer websites to “clearly display” links to customer service data from a specified third party organisation such as Citizens Advice.

Ofgem said that at a later stage it may test and trial regulatory and financial incentives.

“The potential use of incentives could introduce a new approach that is similar to the way these are utilised in the regulation of network companies under their price control framework…and which could stimulate competition between suppliers to continuously improve consumer customer service satisfaction,” it added.

While recognising that financial rewards are not currently an option in the retail sector, Ofgem said a “number of other options” could be explored.

Elsewhere, Ofgem has proposed introducing a requirement for suppliers to provide a freephone number for landlines and mobiles to address what it said is a lack of priority contact methods for vulnerable consumers.

The freephone number would be easily accessible and open to consumers during extended hours, such as between 7am – 10pm Monday to Sunday or even 24/7.

Suppliers would also be required to offer other free alternative contact methods, such as a dedicated email address and webchats.

Debt repayment

Further proposals include tailoring debt repayment plans “at the earliest opportunity” for those who are at risk of struggling to pay their bills. Suppliers would be required to begin contacting and offering suitable debt repayment plans as soon as possible and “make every effort possible” to do this for customers they have not been able to make contact with previously.

The regulator references how its recently published prepayment meter (PPM) code of practice outlines how suppliers should make 10 contact attempts by a range of methods and site welfare visit before force-fitting a PPM. It said the process for offering suitable repayment plans will align with this and that it should occur either alongside one of these contact attempts or before, depending on when a consumer misses a payment.

Additionally, it is proposing to end minimum repayment rates for customers on debt repayment plans to ensure the plans are “proportional and tailored” to meet individual consumer needs.

Consumer standards framework

Ofgem said its consumer standards framework will set out how it regulates to raise consumer standards, including the balance between prescription and outcome-based regulation and how it will use this to address key customer service issues.

“This framework will ensure standards are designed to deliver positive outcomes for consumers by: using a balance of rules-based and principle-based standards; ensuring standards are accompanied by a tailored monitoring framework and an evaluation process; and by incentivising suppliers to deliver continuous improvements to performance levels,” Ofgem explained.