Utility Week

22 | SEPTEMBER 2021 | UTILITY WEEK Customers Analysis Competition takes a backseat to auto switching From raising the price cap to trialling auto switching, it's been a busy few weeks for the energy sector – and not everyone is happy with the direction of travel, says Adam John. E nergy bills have been back at the top of the agenda during the last month as the government unveiled its long-awaited retail strategy and Ofgem announced the big- gest yet increase to the price cap. In the weeks since the announcements many industry commentators have had their say, with top officials from trade body Energy UK slamming what they view as outdated plans to focus heavily on initiatives to get people switching. The Department for Business, Energy and Industrial Strategy (BEIS) kicked off the flurry of news by releasing its plans for the market over the next decade. These include a call for evidence to gather information about the need to reform the green tariff frame- work, as well as potentially boosting con- sumer protections. Central to the strategy, however, are plans around switching, which include a radi- cal proposal to trial automatically switch- ing consumers in danger of rolling on to a default tariff. These plans were also part of a consultation released alongside the strategy. For automatic, or opt-out, switching BEIS intends to begin a controlled test with a small group of suppliers and custom- ers in 2024. The aim of the exercise is to understand whether consumers who have remained on more expensive default tar- iffs have done so because they prefer these arrangements, helping to assess the case for wider intervention. It is proposed that testing should be tar- geted at all default tariff consumers, includ- ing those who initially actively chose to be on a standard variable tariff (SVT), as they are "all at risk of a loyalty penalty". A competitive process to determine the tariff customers switch to is likely to be used for any future full-scale scheme. Once the decision to switch has been made, suppliers must contact and inform their customers that they will be switched to the cheaper tariff by a certain date unless they opt out. To this end the communica- tion will need to be as "simple and clear as possible". Before any testing begins, BEIS intends to develop some qualitative research to con- sider how best to design this communica- tion. Additionally, the testing should allow customers to easily switch back if they wish. BEIS also has plans for opt-in switch- ing which would see disengaged customers prompted to switch supplier with targeted communications, as in Ofgem's recent collec- tive switch trial. BEIS proposes introducing opt-in switch- ing incrementally, scaling up carefully as it develops understanding of consumer out- comes and market impacts. Such a heavy focus on switching was met with dismay by Energy UK chief executive Emma Pinchbeck, who labelled the plans "disappointing" and "stuck in the past". She says: "The energy retail sector has changed beyond all recognition in recent years – and will continue to do so at even greater speed for the benefit of customers – and yet this strategy, which should be look- ing to the future, is stuck in the past." There will be a different, two-way relation- ship between suppliers and their customers in the net zero energy system, but the switch- ing proposals risk "undermining" that future, Pinchbeck says. "It's disappointing and con- cerning that the government's approach to the retail sector threatens to cut across their own decarbonisation strategy," she says. Similarly, the trade body's deputy director Daniel Alchin tells Utility Week: "It feels like there is a continued focus on the narrative that engagement in energy means switching supplier every year. That has certainly been true in the past but with every passing year it gets less and less true." However, Tom Lyon, director of energy at Energy Helpline, a company heavily involved in the first opt-in switching trials, says opt-in switching is a "proven initiative" that will drive positive outcomes for the most disen- gaged consumers. Auto switching could undermine the incentive to shop around

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