Regulate for how consumers consume, urges former MP

Consumers should be placed at the heart of regulation as the utilities market evolves, according to former MP Laura Sandys.

The now chief executive of policy thinktank Challenging Ideas, was speaking at Utility Week Live in Birmingham earlier this week as part of a session exploring the future of regulation.

She suggested the industry is “looking at the future but still dealing with the regulation of the past”.

Sandys who is also chair of the Energy Data Task Force, which was created to advise government, Ofgem and industry, said we are moving from a very centralised system to a “massively dispersed one”, which is much more complex, but in her view also “more exciting”.

She said the industry needs to consider not just what it regulates and for whom but also how it regulates.

“Consumers are changing dramatically and as a result we have got to regulate for how consumers consume and not how business is organised.”

Sandys discussed how the industry was privatised in business sector silos and then created consumer protection. But in her self-proclaimed role of “provocateur” she said there should be a greater focus on “for whom we regulate and placing the consumer right at the heart of everything we do”.

“The world is changing with multiple propositions,” she said. “I love Alexa – I would love her to do everything for me. I don’t want to have to deal with telecoms, water and energy. But everybody has a preference.”

Although she warned there would have to be consideration as to how to regulate Alexa.

“Once you start to get to these digital platforms and aggregators – an energy-focused form of Alexa – we are looking at a very, very different landscape.”

Sandys stressed that utilities should tailor to the wants and needs of customers and not expect customers to navigate their business models.

“I do not feel the consumer should be navigating each of the different regulators, unpicking each of the different and in many ways gaps into which all of these propositions can form. I’m looking for somebody who will regulate my path and not in the silos of the existing structure,” she said.

As utilities transition, the sector should move away from process regulation and instead regulate for consumer detriment rather than how businesses perform, Sandys argued.

“It’s about transferring risks back onto businesses and allowing people like Ofgem not to take the rap for every time businesses do something wrong and for businesses to be responsible.”

And she said power should be put into consumers’ hands to allow them to effectively “make or break markets”.

“As we move to a bundled, blended set of propositions there will be new risks. There are not just going to be those simple risks of being ripped off by your supplier by being on a standard variable tariff. It’s actually going to be a lot more under the bonnet and that’s going to require much more sophistication with how we regulate.”

She concluded: “Tomorrow is here. I look forward to tomorrow from the consumers’ point of view. What we’ve got to do is keep up with the choices consumers want to make, the convenience they want to have and the divergence of how they want to receive utilities.

“It offers the regulatory model huge opportunities to sit on the side of the consumer looking into the businesses, rather than sitting, in many cases, at the centre of the businesses trying to regulate what happens to consumers.

“It will be complicated, it will be messy even but I think if we start now on doing things differently into the future we will be able to unlock the innovation and unlock consumer choice while ensuring consumers stay protected and have fairer deals and justice for all.”