Protection trade

Consumer Focus chief executive Mike O'Connor talks Janet Wood through the new policy-heart of consumer protection - the Regulated Industries Unit

In April next year a new consumer protection unit will swing into action. Temporarily dubbed the Regulated Industries Unit (RIU – see box on page 18), it will bring expertise from Consumer Focus to a new home within Citizens Advice, but the exact role and actions of the new unit are still being determined.

When I spoke to Consumer Focus chief executive Mike O’Connor, the organisation was still absorbing responses to a consultation on the shape of the new unit. The responses said the new unit should at the same time have a deep understanding of its sectors – initially energy and post (plus water in Scotland) – but also be able to take a cross-sectoral view. It should be able to engage with Europe and with the devolved administrations across the UK. That’s a tall order for an organisation that will be smaller than its progenitor.

Consumer Focus has led the discussions about the role of the new unit, and O’Connor believes that it largely has the ability to determine its future, because “as a non-departmental public body it’s for our board to decide what we do”. The government wants the RIU up and running from 1 April 2013, though the secondary legislation fully transferring its powers isn’t expected until 2014. Its work plan will be published in draft this December and in its final form in March next year.

Says O’Connor: “Our unique selling point will be based on our understanding and expertise in complex regulated markets. It’s the forward-looking work that we think we have most to contribute to. An example is our work on smart meters – it’s getting that policy right that will protect the consumer… Other bodies like Which? or Citizens Advice are better placed to carry out consumer education, deal with complaints, etc. We are about making sure the tap is turned off, rather than mopping up the flood.

“Looking to the future when we come together, the prize is a virtuous circle between the growing intelligence that Citizens Advice has now that they have taken on Consumer Direct, and our policy analysis and representation work. We work together to find a better outcome for consumers.”

That means the RIU’s direct customer contacts will be limited. O’Connor comments: “We will work on collective empowerment, collective engagement, but not reaching out to individuals. We don’t have the brand – other people do. We don’t have the reach – other people do. We must work in partnership.”

He adds: “We will make our work public and when needs be we will speak publicly. But we won’t chase headlines. Our initial contacts will always be in private – it only becomes public if it can’t be resolved.”

Some accuse Consumer Focus of being too cosy with the industries it works with. But O’Connor says it’s vital to be able to have private conversations about the issues. “It’s also a question of what is the right thing to do at the right time. We are here to protect consumers and sometimes you do that by being a watchdog – you bark when you see something is wrong, and we will continue to do that. But in many cases the best thing you can do for consumers is stop things going wrong in the first place, and in complex regulated markets that can sometimes be best achieved by being around that table when policy is formulated to speak up for consumers. That’s where we might achieve some of the best results.

“Looking at what has happened in the energy market, the challenges of Energywatch in the past were about rooting out abuses. I am not saying there aren’t still abuses, but I think going forward the biggest challenge is going to be to make sure that the policies we are going to implement over the next five years, which will change conditions for a generation of consumers, are fit for purpose.”

Indeed, the organisation sees itself as a “wholesaler” of information, deciphering complex issues and passing the information to agents such as National

Energy Action.

Organisations responding to the RIU consultation asked which types of customers the unit would support. O’Connor says it’s not a simple answer: “We have a statutory responsibility for vulnerable customers and as long as we exist we will honour it. But the question of who pays – sometimes it is down to which generation should fund investment – is one of the things we are going out to talk to people about, and carrying out research on, so we can influence that debate. But we have to follow the detriment. Vulnerability is a very wide group. There are times when we are all vulnerable consumers.”

Respondents to the consultation were divided on whether the RIU should take on other sectors. O’Connor says a broad view is important, but that doesn’t necessarily mean all in one unit. “CCWater argues that the water market is very different to the energy market and they are right,” he says. “But the consumers are the same. The issues they face around debt and redress, vulnerability, or understanding bills, they are very similar. And being able to look across sectors is one of the things our consultation has shown that people want to know about.”

He says that since he joined the consumer protection world, “what has been disappointing is that the debate is about who does what, rather than what has to be done. If you start out from an analysis of organisations and who does what, it leads to rather sterile debate about organisational interests”. Instead, he says, you have to look at consumer needs and how best to serve them, and then decide who should do it.

“The sooner we get beyond this debate over structures, the sooner we can get to more partnership working. I don’t think we and CCWater have worked together as well as we should have done because there has always been this debate about the fate of the organisations. The sooner we get that straight, the sooner we can build those partnerships. We don’t have to be in one organisation, but we can form partnerships, because we are stronger in partnership and we cost less money.”

The new organisation must be leaner than Consumer Focus, he says. Funding will be lower. “The days of public funding for consumer advocacy are probably mainly behind us. The income will be less but the income will be increasingly driven by the value we can deliver. I don’t think we can depend on any block grant forever. Looking at our work plan, we have to show the value of our work and I am confident that if we do that then we will be supported.”

That doesn’t mean the organisation will be chasing funding on a project basis: each year it will produce a work plan and government will decide whether to fund it. “Our levy funding this year is £9.1 million. Hopefully it will be the same next year, but I think there will be other income that we might have by carrying out projects that are supported by others. It would be very difficult for us to take money from industry, but there are regulators and consumer bodies. I am happy to live in that marketplace, based on the quality of our work.”

The government has committed to transferring Consumer Focus’s powers to Citizens Advice. That includes important information-raising and supercomplaint powers. But O’Connor says: “It is significant to note that we have never used our supercomplaint powers in the energy market, and that shows that we don’t just fire off these missiles because we have them. The nature of our relationship with the energy companies is such that we don’t need to use that weapon and that is a sign of responsibility. We would if we needed to.”

What’s in the evolving group’s in-tray at the moment are some big issues, such as the smart meter rollout, price reviews for energy networks, and Electricity Market Reform. Ofgem points out that recently Consumer Focus has been an absentee at some meetings and O’Connor admits the organisation may have taken its eye off the ball: “The challenge of the past couple of years has distracted us. We have to get beyond that now and play a bigger role.”

Director of policy Adam Scorer adds that two years of uncertainty have “been the most unsettling time… Not only for our staff but for our ability to bring in people to cover things like this… you have to have people with expertise, and sometimes it’s difficult to maintain the continuity”.

O’Connor says that is also feeding into its draft work programme. “What is it that Decc, Ofgem, suppliers, network operators, government, and other stakeholders want us to do? How many committees do they want us to be on, how many working groups, how many consultations? How many continuity issues in the energy market do we need to cover?”

The result, he says, will be a detailed work plan to take into next year. “The demand for deep, highly technical understanding of the issues that are coming up is growing. People want more from the RIU than they ever got from Consumer Focus, so it’s an exciting time.”

This article first appeared in Utility Week’s print edition of 12th October 2012.

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