Utilities must beware ‘blind spots’ of vulnerability

Vulnerability leads across the utilities sector are preparing for a “crescendo” of poverty to hit this winter, despite extensive government support.

At a roundtable hosted by Utility Week, in association with Mastercard, experts warned that time was running out to sharpen early warning indicators to capture emerging forms of vulnerability.

They also raised the importance of understanding current challenges and identifying how the industry can find solutions to tackle them. This stressed the importance of upskilling and supporting frontline staff, and an acceptance that in many cases payment plans won’t work and companies need to be flexible enough to accommodate the level of payment a customer can afford.

The conversation took place in September, as the industry was digesting the details, and impact, of the Energy Price Guarantee. The attendees, taking in affordability and vulnerability job titles as well as heads of income, risk and financial customer care, agreed that while government support was welcome, it would not arrest a tough winter for many customers.

A water company director said: “If you had asked me, even two months ago, were we seeing the impact, I probably would have said, we’re hearing it in the calls, not just in my areas of collections but in our mainstream call centres. That trend has progressed and it’s quite clear now that there’s something serious going on.”

One executive at a major energy retailer said: “We sometimes have to remind ourselves that our job is great. We get up every day and we help people – what is better than that? But when we were in a situation where people were facing a £5,000 bill, that’s going beyond the point where we can solve the problem. We were throwing everything at the situation but that was starting to get a bit demoralizing for our staff.

“So the £2,500 (cost of energy for an average household under the Energy Price Guarantee) was a sigh of relief because at least we can help with that.”

However, there was general agreement from energy professionals around the table that, while generous, the Energy Price Guarantee remains a drop in the ocean of affordability.

One said: “You cannot believe the level of poverty out there. This isn’t just about paying a utility bill, it’s about being able to feed your family, get the bus to work, pay for a funeral for your loved one. People are being forced to make terrible choices and I think we are reaching a crescendo in terms of the level of poverty we are facing. And I don’t see a plan to deal with that.”

Beyond the price freeze

Over the past few months, against a backdrop of extreme uncertainty, utilities have had to prepare for all eventualities. The government’s decision on 18 October (after the roundtable had taken place) that the Energy Price Guarantee will run for six months instead of two years means all options must once again be on the table.

Two issues that dominated the conversation in relation to energy customers were the need for a social tariff and the challenge of dealing with pre-payment meter (PPM) customers.

On the latter, a head of affordability at a large supplier said: “It still fries my brain that if you’re a PPM customer, you pay more, when the customers that are in the prepayment space are typically vulnerable.

“We can only offer one PPM tariff so it’s not even possible to create a social tariff and leave that PPM tariff out there – it’s just not possible on the meter.”

At Utility Week’s Consumer Vulnerability & Debt Conference, which preceded the roundtable, Citizens’ Advice had called for forced PPM installations for the vulnerable to be banned.

An energy retailer taking part in the roundtable supported the move but added: “I would like to give them the option to have a PPM because it does help them budget, but that needs to be accompanied by a way to get them through the cost of living crisis.

“Could we essentially treat them like a direct debit customer – where they pay us £150 all the time and we see their volume fluctuate – but if they fall off that arrangement there is the PPM? It’s a bit like a Direct Debit so if that fails you move to on demand billing.”

They added that the licence conditions around PPM installations remain constricting, explaining: “We’re not allowed to fit a PPM if we know that customer cannot afford the bill. So you end up in a kind of moratorium for what is a very large proportion of customers, just from the license condition. The second you do an income and expenditure it’s going to come back negative – at which point you’re not supposed to put a meter on a wall.”

One attendee, a former regulator, pointed out that Ofgem still had the power to reinstate social tariffs, which all but disappeared from the market after a review a decade ago.

They said: “Ofgem could reinstate that if it was thinking outside the box and being dynamic. It took something away that was working, now it should bring it back.”

The move was backed by a retailer who said: “A social tariff offers help directly to those that need it and customers understand it.”

Little and often

In the absence of these measures, what can the utilities sector do to mitigate the worst impacts of the cost of living crisis on consumers? Experts across both energy and water agreed there was no one-size-fit-all solution for vulnerable customers and that companies need to be prepared to work with what consumers can afford.

One representative from the water sector said: “Something we learnt from Covid is the importance of talking to the customer and finding out what they can pay and being flexible enough to respond to that. We can’t ignore the situation but we also can’t lose that conversation.”

An energy retailer added that “there is an opportunity for energy with direct debits”, adding: “If you’re a customer on demand and you’re staring down the barrel of a £5,000 bill then £250 a month actually feels a lot better. Then we can have the conversation about consumption and try to make real in-roads.”

This consumption conversation was one highlighted by several attendees as being vitally important. A regulatory expert claimed that the water sector in particular must work harder to land that message.

They said: “People can’t refuse the reality, particularly on water – it’s a limited resource and this is an opportunity to have that conversation. Maybe people are in listening mode now in a way they haven’t been in the past.”

The group also talked about the role of technology in addressing some of these challenges.

One delegate described the AI solution their company has deployed to analyse calls, saying: “It’s allowed us to learn a lot about the customer. We’ve amassed a lot of data but we need to get better at using that as a base to improve everything we do.”

A water company director talked about the suite of digital tools they have developed for payments. They described the aim as: “We want every customer interaction to genuinely be helpful to the customer and provide a solution that is helpful. Now that’s getting harder and harder because, as we’ve talked about, there’s a growing segment of customers that there just isn’t a solution for. But instead of getting frozen in our seats, let’s just do what we can do.”

Back to basics

The discussion concluded with a conversation around how teams are evolving and upskilling to meet new challenges.

A representative from a water company stressed it was key that affordability and vulnerability were being considered across departments – not just in areas like collections. They also talked about the need to utilise technology to get support to customers quicker but insisted: “We also need to build out our capabilities beyond digital, so we can still offer that human conversation – that’s absolutely vital in times like these.”

A water retailer agreed that while their company had been increasingly using tools such as AI to improve the customer journey “what’s really needed is a bit more back to basics”.

They added: “The impact on business customers, and especially SME, can be overlooked but they have the potential to be a real problem child for the industry. If you look at the rises individually – energy, materials, lending – they’re bad but together they’re appalling.

“So for us it’s got to be about listen, talk, listen, talk – and try to convince them not to bury their heads. It’s hard with water because it’s not always top of their priority list.”

Meanwhile an executive at an energy retailer said the company was trying different ways to support its staff in dealing with increasingly desperate situations for customers.

“A lot of people tell us it’s hard to switch off so we have introduced warm down sessions to help them download their brain at the end of the day. They’re only human and you can’t help but be moved by some of the things you hear. Our staff really care but they can’t solve everyone’s problems in isolation.”

This roundtable took place on the back of the publication of a report by Utility Week and Mastercard exploring how utilities are innovating to improve their approach to tackling customer debt and the role technology is playing in accelerating this process. Download it here.