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28 | DECEMBER 2020 | UTILITY WEEK Customers Opinion Greg Jackson, chief executive, Octopus Energy I n 1865, following intense lobbying from horse-drawn carriage operators and the public railway industry, Palmerston's government passed The Locomotive Act, forcing cars to be preceded by someone walking with a red flag. This law effectively stopped innovation in powered road transport in Britain for over a quarter of a century. Today, lobbyists, consultants and entrenched inter- ests risk similarly stifling the transition to renewable energy. While it is inevitable that we will decarbonise energy, it could end up taking a lot longer than neces- sary, and costing vastly more. Insidiously, the costs are buried deep in the system, making them opaque and regressive as they flow through to energy bills. A recent article on Utility Week's website, entitled "Are we sleepwalking into a two-tier energy market?" (https://utilityweek.co.uk/are-we-sleepwalking-into-a- two-tier-energy-market/) was helpful in highlighting some of the myths that risk repeating the follies of 19th century locomotion laws and setting the UK back in the critical mission to decarbonise. First – the headline highlighted the supposed risk of "sleepwalking into a two-tier energy system". Yet we have had a regressive two-tier energy system for dec- ades, where customers who don't "engage" have been charged up to 50 per cent more than those who do (and even worse for those on prepay meters). This has been tempered by the energy price cap – but is still a feature of incumbents' pricing models. Note that this "engagement" has no impact on the overall cost of the energy system, it just shis costs from some customers to others – mainly benefiting high income house- holds at the expense of low-income households. One observer repeats the dan- gerous myth that challenger brands at the heart of much of the innovation in the market are not interested in attracting vulner- able customers because they are likely to come with bigger costs to serve. This is, frankly, rubbish. First, challenger retailers relentlessly seek out all cus- tomers. Take five of the biggest: Octopus, Bulb, Utilita, Shell, and Utility Warehouse. Between them, they serve around 20 per cent of UK households and recruit customers not just via online channels, but through telesales, door-to-door, shopping centres, partnerships with local authorities and charities, and customer referrals. Indeed, it is incumbents who are particularly dependent on, and oen dominate, online price com- parison websites. Second, Octopus's data shows that vulnerable cus- tomers cost about the same to support as "switchy" cus- tomers and every customer of a challenger is a switcher. Switchers come with the cost of onboarding, ooard- ing, dealing with direct debits and closing balances, and the frequent debt le when people switch and move. And that's before the very high costs of customer acqui- sition. The reality is that legacy energy suppliers enjoy large books of lucrative, low-cost-to-serve disengaged customers, being charged at, or close to, the price cap. Digital laggards The only reason incumbents are so unprofitable is a fail- ure to have invested in the digital systems which would reduce their costs to serve across all customers – includ- ing vulnerable and fuel poor customers. The price cap has begun to change this: Eon/Npower licensing Octopus's Kraken, Ovo rolling SSE onto Orion and British Gas emulating challengers with Evolve. These platforms don't just reduce costs but also dra- matically improve service and act as a platform for the innovation energy so desperately needs. The reality is that companies like Octopus are driving high standards for all customers. If a company truly cares about its customers, it doesn't need to categorise – it's not like Tesco have different doors for vulnerable and non-vulnerable households. Indeed, doing so is futile because households move in and out of vulnerability – and, sadly, we'll see a lot more of that with Covid. Retail- ers need to treat all customers well, not subject them to labels and merry-go-rounds. For example, our website is designed with every form of accessibility in mind. Unlike the many compa- nies who claim they care about vulnerable customers, every page is navigable with large fonts, no mouse, screen readers, etc. Key financials are in the plain text of monthly emails – not buried away in an unreadable pdf hidden behind a password you'll never remember. This isn't to serve tech-savvy millennials – it's to "The current energy system is rigged against low-income households"