Retail sector needs to get back to basics

Too many customers feel alienated from an energy supply industry they do not trust – and time is running out for retailers to ensure they get the basics right.

Since coming to power in the wake of the Brexit vote, prime minster Theresa May has indicated a much greater appetite for market intervention than her predecessor.

“It’s just not right that two-thirds of energy customers are stuck on the most expensive tariffs, “she said at the Conservative party conference in October.

It was in this context that regulators gave a stark warning to the energy sector at the Utility Week Energy Customer Conference in Birmingham on 19 January. “This issue isn’t new but it is the issue of the day,” said Ofgem senior partner for consumers and competition Rachel Fletcher. “The new government has pretty much made it clear that industry is in a last chance saloon and that this issue needs to be addressed urgently.”

She said suppliers are still not doing enough to get customers on to the best deals and cautioned that the current situation is “not sustainable or politically acceptable”.

The chair of the Competition and Markets Authority (CMA) investigation into the energy market, Roger Witcomb, was equally clear on the gravity of the situation. “This argument is not settled. It really isn’t. When you see senior politicians saying ‘why should loyal customers have to shop around?’ that is actually saying ‘why do we have a competitive market in supply?’.”

Witcomb noted the makeup of the two-thirds of customers currently stuck on costly standard variable tariffs: people in local authority accommodation; renters on prepayment meters; the elderly; those on low incomes or low educational attainments.“All the people you would think would actually benefit most from getting cheap energy are those who are actually paying too much.”

If these customers cannot be persuaded to start engaging, there is “a real danger that if not now, perhaps at some stage in the fairly near future, the energy retail market will become a thing of the past”, he added.

Witcomb said one of the biggest barriers to ending the two-tier energy market is the lack of trust in suppliers. “There is a feeling that we’re being overcharged and you can’t trust any of them, so what is the point of engaging?”

Fletcher pointed out that many consumers were worried about the switching process going wrong, so making switching “seamless and reliable” would be a “game changer”.

It doesn’t help that suppliers still aren’t getting the basics right. “More than 70 per cent of the complaints we receive are about billing,” said Ombudsman Services assistant director of policy development David Pilling.

He added that smart meters should resolve many of these, enabling suppliers to redirect their resources to more complex and challenging complaints. However, Pilling warned that the smart meter rollout “could actually damage trust if it is done badly”.

Smart meters will enable suppliers to collect huge volumes of data on the behaviour of their customers but they will need to be careful how they use it, warned Centrica director of industry development Catherine O’Kelly.

Uswitch energy lead Claire Osborne said smart meters would work best for customers when they don’t notice them at all. “Suppliers should be looking at how to integrate them with other devices and help customers to save the world while doing nothing.”

But before any of this can happen, the basics needs to be done right to give the energy retailers the platform to engage with their customers.

Views from the speakers:

“This issue isn’t new but it is the issue of the day. The new government has pretty much made it clear that industry is in a last chance saloon and that this issue needs to be addressed urgently.”

Rachel Fletcher, senior partner for consumers and competition, Ofgem on the “two-tier” retail market

“The winners in the new world will treat data right. Suppliers must use it to make customers’ lives ­better.”

David Walker, head of customer strategy and planning, SSE

“The ambition shouldn’t be to engage customers over smart meters. Suppliers should be looking at how to integrate them with other devices and help customers to ‘save the world’ while doing nothing.”

Claire Osborne, energy lead, Uswitch

“[Artificial intelligence] fundamentally changes the nature of the issues that will come into your contact centre. When customers contact you, it will be about complex, difficult things that are very hard to do on an automatic or AI basis, and I think that will really change the type of service staff we are looking at in the future.”

Jo Upward, vice president, Institute of Customer Service

“Suppliers need to tailor the way they make data available to customers… It is important customers trust suppliers to use their data, and that they get something back in return.”

Catherine O’Kelly, director of industry development, British Gas/Centrica

“This argument is not settled. It really isn’t… When you see senior politicians saying, ‘Why should loyal customers have to shop around?’ that is actually saying ‘Why do we have a competitive market in supply?’ 

“[There is] real danger that if not now, perhaps at some stage in the fairly near future, the energy retail market will become a thing of the past.”

Roger Witcomb, chair of the CMA investigation into the energy market

Five Key Points

1. Trust – Whether on prices, switching, billing or data, suppliers need to earn the trust of consumers if further market intervention is to be avoided.

2. The basics – Many suppliers still aren’t getting the basics right, particularly when it comes to billing. Doing so will free up lots of resources for more challenging problems.

3. Personalisation – Suppliers will get the best response from consumers when their interactions and offerings are personalised. Some people will really engage with their smart meter, checking their energy usage every day, but most will want it to fade into the background.

4. Data – Suppliers need to explain to customers how using their data will improve their lives. Data has to be valuable to the consumer and not just the supplier.

5. AI – Suppliers need to prepare for a future in which most basic complaints are dealt with by artificial intelligence and human employees will be left to deal with more complex issues.