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Ofgem: Why energy regulation must focus on consumers

Pound coins on energy prices

At a Which? event, Ofgem’s chief Dermot Nolan outlined his vision for getting customers involved in the energy market. In this guest post, he explains more about this vision.

People aren’t happy with the energy market. I know this. I also know we need to see suppliers transforming the way they treat consumers if we are to see trust rebuilt. That’s why our main goal now and in the future is to serve consumers and listen to them when they tell us what they want.

So this is why we listen to consumer organisations like Which? and Citizens Advice, and those helping vulnerable people, like Age UK. We also work with the energy industry, but above all, we want to listen to energy customers both householders and businesses.

Energy prices have risen considerably. Energy complaint numbers have also risen and trust in energy companies has fallen. Our analysis also shows that competition does not seem to be working as well as it could be for consumers and this is why we’ve referred the market to the Competition and Markets Authority (CMA).

The primary goal of the investigation is to see if there are any barriers that prevent competition from bearing down as hard as possible on prices. Also many of the problems in competition are rooted in lack of consumer trust and were clear when Which? recently captured the views of consumers on video.

What a good energy market looks like

To understand the market, we must first understand the experience of energy customers and the way they interact with energy products. And we must use this understanding to determine how and when we need to intervene. This insight will set our strategic priorities as we look to improve the energy market.

So what does a ‘good’ energy market look like? To start with, energy companies will need to raise their minimum standards and treat their customers fairly. Senior managers at energy companies need to be accountable for consumer engagement. We need switching rates and trust in energy companies to increase, and complaints about suppliers to fall. When the energy suppliers want to introduce innovative new products, they must do so fairly and manage the cost to those footing the bill.

How we’ll get there

To get there, we need better information for customers: simpler and clearer bills, and easier switching and this is what our recent reforms to the energy market have set out to deliver. We also need better complaints handling. We’ll hold energy suppliers to account if they let down consumers by poor complaint handling and we already have investigations into Npower and Scottish Power. Most importantly, we need better customer service with Standards of Conduct for all suppliers, and enforcement action if they fail. This is no idle threat as we have imposed penalties of over £50 million over the last four weeks against energy firms who have failed to deliver energy efficiency measures for some of Britain’s most vulnerable households.

To achieve these goals we’ve set to work in a number of areas aimed at helping consumers. We want to work with price comparison websites who have signed up to our confidence code to ensure that the way they present information is clear and easy for consumers to use. We worked with Government on a recent mail out to eight million recipients of winter fuel payments to remind them of their switching options as part of our Be an energy shopper campaign.

Improving customer service

We have also acted on customer service issues – we’ve ensured energy suppliers have committed to paying back balances left behind by consumers when they have closed accounts. And suppliers have recently launched the My energy credit campaign to help reunite consumers with their cash.

Alongside the CMA’s investigation into competition, we’re also looking to the future of the energy market. We believe smart meters will assist consumer switching and empowerment and we want innovation to be in the consumer’s interest. We’re committed to trialling products, measuring results, and disseminating successes more widely.

But in the meantime, I want to ensure that everything Ofgem does is informed by consumers as our primary duty is to protect their interests in the energy market.

Which? Conversation provides guest spots to external contributors. This is by Dermot Nolan, Chief Executive at Ofgem. All opinions expressed here are Dermot’s own, not necessarily those of Which?.

tommy mac says:
18 December 2014

Standing charges should be banned.We should pay for what we use and not subsidise others. Regards tommy mac

Mutko says:
18 December 2014

We have paid british gas thousands for homecare 300 in the past 15 years. Get fed up when they try and sell you system upgrades. You get stuck in a vicious circle ….if you don’t agree with them or take their advice, you will most probably loose your contract with them. All they have to say is “we told you so…that it needed replacement etc ”
Some of the advice has been unnecessary as confirmed by independent engineers.

SSE from Marks and Spencer’s and BGas never refund your credit in your bank account….they are so quick to take DD payments in time!! You have to call them and wait for months before a credit appears in your next statement.

Yes i totally agree.We have experienced the exact same problem with previously British gas and now the same carry on with Scottish power.It’s outrageous that they can get off with this practice,meanwhile we pay up for less than second rate services.Time something was done about this,its been going on far too long.

joseph allison says:
20 December 2014

I agree entirely the price of to gas and electricity is going down but the price to the house holder is not going down.

In response to all those who have had problems with the length of waiting time, is for OFGEM not only to levy fines on the suppliers concerned but also on the Directors, both executive and non executive, after all most of them are paid extremely well for apparently doing very little. If they took more interest in how the organization is run and took note of the complaints made then perhaps things might improve. The aforementioned could also apply to other organizations e.g Telecoms, H M Customs & Excise, although this would have to be Civil Servants. All these organizations can afford the fines and ignore the bad publicity, but fining the top echelons might bring an improvement.

F Roberts says:
18 December 2014

Whilst agreeing with the ‘Stuck on Hold’ problem I think that a far worst problem is the ‘Choose your Option, messages. They Never seem to offer an option to meet the needs of my current enquiry or get past the 20 options . I read with regret that BT is trying to buy EE, a company which to my mind should be prosecuted under the Trades Description Act for their claim to have a CUSTOMER SERVICE DEPARTMENT. Has anyone ever tried to find an email address to contact them.

kara says:
13 April 2015

I am with EE, and have known for sure when BT take over i will be harassed into buying T.V broadband from them, and landlines. My minutes, texts, and internet will no doubt become a bribe “sign up on all our above offers or we will double your mobile package costs, we are trying to save you money.” I am already set to budge over to the next rival phone company.

jastan says:
18 December 2014

I would like to see a state run energy supplier competing with the others. Similar to the great success on the East Coast main line rail service in recent years. The advantage would be that the state would not need the percent profit that the business sector is forced into by UK company law. The achilles heel of the business sector is the requirement of company law to make a profit for distribution to shareholdres. Any profit made by the state run company would be recycled to the Treasury to the benefit of UK tax payers.

The competition would be interesting.

My bugbear is with SCOTTISH POWER! This company has left me fuming with the length of time they have left me hanging on the phone.I tried on numerous occasions to speak to someone but I never succeeded.
I remember hanging on the telephone for 45 minutes on a few attempts only to be cut off,OMG the stress!
The only way I eventually got a reply was because I wrote to the consumer expert who writes for the Daily Record,so that shows you how bad they are.

Go straight to the top & email the CEO – info can easily be found on Google.

E Malone says:
19 December 2014

Priority should be 1/ Put pressure on the Government to act and do their job properly and 2/ Reduction of energy price to customers in keeping with reduced energy costs worldwide. Car/vehicle fuel cost reductions recently are an example. Seems like most authority is afraid of these energy companies, including the Gov. Good service is important but a lower priority.

I wonder why, in spite of all this dissatisfaction, so many of us still refuse to vote with our feet and switch supplier? We really don’t have to put up with poor (or non-existent) customer service. We can do something about it!

I’ve recently switched to Good Energy and couldn’t be happier. Not only do they have pleasant people on the phone who are helpful, they’ve also got some great plans for renewable energy generation and helping Britain become more energy secure in the future.

kara says:
13 April 2015

If your in a bill dispute you can’t just leave, what with threats ‘we will ruin your credit rating, baliffs?’ You need to clear your name and the problem up, why drag all that baggage to a new energy supplier?

19 December 2014

I switched to EDF some time ago and am now on my third fixed price deal. They undertook to tell me of cheaper deals offered by themselves and others, and they do – but there are so many of them! I know we want effective competition, but I get a bit fed up of being advised of apparently better tariffs, but they are for different durations and I can’t be bothered to investigate every one. I am fixed to Feb 2016, but can get our penalty free, so I will be watching for prices to come down in the current oil and gas marketplace. It is easy to switch.

Henry Cooper says:
19 December 2014

I have just spent three weeks trying to get British Gas to itemize the contents of the quotation I was given for a new boiler because it appeared that there were large gaps in the final amount quoted. no-one would call me back when promised. I was ready to tear my hair out when the man I had been trying to contact finally called me today, then sent an email with the required details in it.

I hope you got three quotes as BG have had a bad reputation on upselling.

When I buy my energy in the form of petrol I can see, from a distance, what each garage charges. Why cant sellers of gas and electricity do the same? I think we all know why.

Interesting point. I am conscious that petrol stations do change prices daily for local competitive purposes, and also in response to conditions at the local refinery, and in the world markets.

So provided the general public are happy with frequent price changes taking place at the suppliers whim then I am sure we could have more price flexibility. Many people feel more comfortable having the energy piped into their home with a reasonable idea as to the cost over a period.

People do travel to get the cheapest deal – or have to travel. Number of petrol stations in the UK has reduced from 37539 [1970] to 8677 [2012] so I guess we all spend more money[fuel] to go and collect it.

Maybe I am unusual but I don’t shop around for fuel. I live a mile from a supermarket and generally use that, generally when I’m using the store. It is the same price or cheaper than other filling stations in the area when I have checked. When visiting friends I have asked where to get fuel and used their recommendation.

We should abolish standing charges for gas and electricity because low users subsidise those who use more energy. That makes no environmental sense and is hard on those who struggle with their energy bills. Everyone uses energy so it is delivered to their home. In most areas we have street lighting provided near our homes and no-one suggests that there should be a standing charge. For those who use more energy because of medical conditions or other valid reasons, they should be supported via our benefits system if they are short of money. That’s much fairer than having the poor subsidise heavy users with no shortage of money..

” We should abolish standing charges for gas and electricity because low users subsidise those who use more energy.” wavechange

I find that statement unsupportable and perhaps you could explain the logic. At the moment it seems analogous to a statement that Road Tax subsidises those who use most energy.

Passing on from that the “Death Spiral” argument on infrastructure costs needs addressing and a refutation.

Dieseltaylor – I am not sure sure if Vehicle Excise Duty is useful for comparison since most drivers pay much more for fuel and some pay little or nothing because they drive cars with lower emissions.

Have a look at the figures for the number of people in arrears or being disconnected for failure to pay their energy bills. Look through Which? Consumer Insight or many other websites and you will see how worried many are about the cost of energy. Many don’t own their own homes, so much of their income is spent on rent, and food prices are rising. When I was in London recently I learned that there has been an upsurge in people living in small boats on the Thames because they cannot afford to rent. Now that I’m retired and using more energy, I’m probably one of the ones who is being subsidised by those who are struggling to pay their bills, thanks to standing charges.

If you compare standing charges between suppliers it is evident that the charge is made up. Some tariffs have no standing charges. Some houses are close together and others have long pipes and cables supplying them. My suggestion is that standing charges are abolished and the costs of the infrastructure are met in some other way, just like street lighting is.

Thankfully, Which? is trying to push forward simple energy tariffs without standing charges.

Most of us don’t know what it’s like to be cold, except when our heating breaks down. I would prefer to see the government helping those who are struggling rather than leaving it to charities.

Alan Bernstone says:
20 December 2014

The one thing that realy annoys me when you telephone energy suppliers is the length of time they take to answer the call then you might be lucky to get someone who knows what they are talking about without having to transfer you to an other department which means your on hold for a further 15 minutes which is costing me a pensioner money I can ill afford energy suppliers would be wise to know their customers financial situation especially if they are a pensioner or a disabled on benefits as money is a fixed income for both which can cause problems if its been wasted waiting for someone to answer the telephone

Ro Atkinson says:
22 December 2014

There are definitely liberties being taken with the way in which phones are being answered. This happens across industry. It is frustrating when there is always a recorded message telling us that they are experiencing a higher than usual number of calls so we will have to remain on hold. If it is higher than they are used to then it is no surprise they have too few phone operators but the problem is that they are always receiving a higher than usual number of calls. Logically the number of people calling them must be steadily increasing hour by hour with never any fewer callers. It is remarkable that there is any unemployment in the country as more and more people must be getting hired to answer phones but no sooner are they employed than the number of callers becomes higher. Obviously we are being lied to; in truth I would say we are being deceived in order that these companies can gain a pecuniary advantage. This is literally fraudulent. In addition we are usually being charged more than average for these phone calls, from which companies draw further profit. There should be a class action case brought against this practice so that we can be compensated for our costs and time.

Stuart says:
22 December 2014

I experienced problems with First Utility when I moved home and was told they couldn’t simply transfer my account but I had to switch back to them. They never kept me informed about what was happening by email or phone. I tried several times to call them and I found myself being told I was in a queue and I was anywhere between 30 and 56 in the queue. I emailed First Utility several times asking them to phone me and every reply said that if I wanted further information from their customer services team I would have to phone them. In spite of challenging this they kept saying I must phone them. I live on a pension and therefore refused to join their telephone queue and run up a huge bill waiting for them to answer.

If you don’t get any response from First Utility and they keep you hanging on the phone tell them you will get advice from the Citizens Advice and do it, you can like me put a little money in their box and they don’t charge you for the call. Email them don’t call.
I am also on a pension but I did get the CAB to help and things get sorted for me, see my letter dated today 29/12/14
Good luck.
email address: customer.service@first-utility.com

Stuart, We also had a terrible experience with First Utility when we moved house. A short summary appears on page 28 of the August Which magazine. They took 3 months to restart their energy supply. Meanwhile we were stuck on an expensive deemed tariff with the new property’s existing supplier. They sent 35 conflicting emails one of which made false accusations and one of which contained totally unjustifiable threats of legal action for non-payment of a bill. They used incorrect meter readings for both the old and the new property. In short the left hand does not know what the right hand is doing i.e their internal communication is quite hopeless and they are unfit to be dealing with the public.

I left British Gas in February 2014 due to appalling service & a complaint to the CEO pointing out that the left hand had no idea what the right hand was doing in his organisation. Both gas & electricity accounts were subsequently closed by the CEO’s office with £0 balance in July. They are STILL sending me bills with “(gu)estimated” figures – no idea why, as for 15 years I always provided quarterly meter readings when I WAS a customer. Needless to say, I haven’t paid the fairytale bills despite all kinds of threats; cutting me off (interesting concept since they don’t provide my supply), pre-payment meter (ditto!), debt collection agencies. Pantomime season at BG! As you can’t get past the Indians with a shocking command of the English language on the contact number, I’m kind of looking forward to someone knocking on my door so that I can actually speak to real person & point out their errors!

kara says:
13 April 2015

It’s funny you should mention British gas, they mis sell tariffs with bold claims ‘we guarantee your prices won’t go up between march such and such till the next march.’ Load of crap! They are Lovely and fair then suddenly turn on you and snap your head back! I am proceessing a complaint about these bullies with the ray of sunshine in my eyes as I am looking at OVO energy supplier, I don’t trust British gas to bill me anymore, they ruined our good thing going on, that will be something they can ponder on as I tell the entire work force ‘how tragic they’ve become!’

Actions so far seem to have had precious little effect, in fact some things are worse. Therefore I propose:
1. Standing charges SHOULD BE BANNED, (ref. ‘Tommy Mac’ and others) or at the very least kept below a pre determined maximum charge which should be MUCH lower than the current trend.
2. There is no point in Ofgem or anyone else fining the suppliers as eventually it will be passed on to the bill payer.
Fines should be replaced with a punishment which will hurt and therefore save the need to go over the same discussion year on year. Possibly a ban on enlisting any new customers for one,two or three years depending on the severity of the “crime”. Alternatively a limit on price increases for a long period of time.
3. Ofgem MUST ACT, not just threaten.
4. The number of tariffs must be strictly limited to one or two per company.
5. Bills MUST be so simple that even I can understand them.

There is a very simple way of forcing the energy companies to become transparent:
Abolish 4 page confusing bills with ‘conversions’ – few, if any, need to know these technicalities.
Charges should simply state ‘pence per meter unit’ and this, together with no more than 2 tarriffs, should be the common order of complience. Also, it should be mandatory for the energy supplier to carry out a meter reading at least quarterly.
3 simple conditions – END OF STRUGGLE!

Arthur says:
26 December 2014

Scottish Power owe me £86 from Jan 2014. In March they sent me a letter threatening me with a debt collector and their fees, because they said I owed them money, also saying they would downgrade my credit rating. But I was in credit at the time and they still haven’t paid.

Lorena says:
26 December 2014

I have recently used switch with which to change gas and electricity supplier, from Scottish Power to the co-operative, but it is going to take six weeks for the switch to take place. Too long!

Amelia says:
28 December 2014

Scottish Power, I have had no bills since a meter change and my account is now £1416 in credit.
I requested a change from an economy seven meter to a single meter reading in March this year. From then until mid October, when they sent a man to do an actual reading, I have been unable to put my meter readings on line as SP had not change the screen, despite phone calls and giving meter readings over the phone. In the last 3 months getting to speak to SP on the phone has been virtually impossible, I have hung on for 30 minutes at a time, on their free phone number with no joy and their call back service has no free slots available. The only way I managed to speak to someone was by pressing the button to say I was a new customer. I have had several acknowledgements of my complaint on line and one by letter which was sent 3 weeks ago. Consequently I do not know where I am with payments and intend to write to Keith Clitheroe CEO Retail, this week and am also looking to stop my direct debits until it is sorted out. I can put my meter readings on the system now but am told they have a new IT system and
are still trying to sort it out. It is an absolute shambles.

Do it! Go straight to the CEO.