Utility Week

UTILITY WEEK | APRIL 2022 | 17 Energy their tari with their existing supplier to meet their current (and future) needs," he tells Utility Week. Even before the crisis, says Cole, the organisation was examining how it needed to evolve to re• ect what is important for today's energy customers. He continues: "We heard how a repeated message of 'keep changing supplier to make a saving' started to not ring true, when cus- tomers were equally mindful of the beneƒ ts from changing the tari they held with an existing supplier. "Later this year we will update our Guar- antee to place equal importance on 'internal switching' as well as a number of updated commitments. "This complements the government's roll- back from their auto-switching proposals: in the transition to net zero it is essential that customers have strong and robust relation- ships with their energy supplier since they'll need support and tools as they navigate the path to decarbonising their home." Sharing similar thoughts is Octopus Ener- gy's chief executive, who believes retailers must be innovative. "It's vital that customers have the free- dom to switch easily, because that should keep the pressure on retailers to deliver ser- vice and value," says Jackson. "But using the volume of switching as a measure of market success is bonkers – happy customers don't switch. "Indeed, high churn in most markets would trigger alarm bells and indicate not only poor customer experience, but also indicate low investment in innovation." Shi ing strategies Recent regulatory developments indicate a change in approach from both the govern- ment and Ofgem. In February, in response to the crisis, the energy regulator unveiled plans to temporar- ily bar suppliers from o ering tari s that are exclusive to new customers. By making it harder for suppliers to undercut one another's tari s, the move will reduce the risk of "unsustainable competi- tion" between suppliers that increases the risk of "disorderly" exits from the market. The move, said Investec analyst Martin Young, represents a shi• from switching being seen as the "Holy Grail" and a frame- work encouraging "moral hazard". Elsewhere there also appears to have been a change in heart from the government in regard to its retail strategy. In December, energy secretary Kwasi Kwarteng announced the government would be pausing the strategy, which heavily focused on switching disengaged custom- ers automatically when they reach the end of their default tari , as well as prompting switching more generally. In a statement to Parliament, Kwarteng said that while the vision for the govern- ment's strategy remains the right one, it also needs to take into account the lessons from recent months to ensure the market is "resil- ient, sustainable, and continues to protect consumers as we move to a net zero energy system". The move has been welcomed by the sec- tor. Eon UK chief executive Michael Lewis believes the reset should be used to change course and deliver a more "resilient, home- grown customer led energy system". A dedication to the "switch-at-all-costs model", says Lewis, has e ectively created a "race to the bottom" approach that focuses on unit price above anything else, including the security and sustainability of suppliers and their business models. This approach, he says, led to almost 30 suppliers exiting the market in just over six months because they were "poorly hedged and capitalised and couldn't respond to mar- ket changes". He adds: "That model also assumes that all customers value the same things, but we know our market needs to evolve from that one-size-ƒ ts-all approach and recognise cus- tomers as individuals and that one person's interaction with energy is going to be com- pletely di erent to another's. "While there will always be some customers who will focus solely on price, others will value other things more than just cost, such as quality of service, new technology that helps them reduce their demand for energy, as well as tari s that reward them for helping to run a more eŸ cient energy system." For Lewis the solution is to foster deeper, long-term relationships which are built on trust to help customers take the path to net zero that works best for them. "That means using our expertise to make sure complicated technologies and inte- grated systems are delivered in a simple and e ective way that makes people's lives eas- ier. This is where the market is heading and it needs to get there fast to deliver net zero. "We should use the retail market strategy reset to change course and deliver this better future, which will help deliver a more resil- ient, home-grown customer-led energy sys- tem that helps to keep energy bills a ordable for everyone." Noting that price will always remain an important factor for consumers, Energy UK's deputy director for retail, Dan Alchin, believes that developing more innovative products and services also creates more sav- ings opportunities for customers. He says: "I think some of the attraction for some of the more innovative and smart systems and technologies will be di erent kinds of savings. "Maybe not necessarily in the • at rate of the tari , but whether that can be through the opportunity to store and resell energy, or about when and how they use their energy through things like time-of-use tari s. They may o er di erent opportunities for savings." It is not clear how long the energy crisis and its resulting impact on the UK retail mar- ket will last. However, there is a recognition from the sector that going forward, switching should be encouraged from a service per- spective, rather than just price. As Jackson observes: "We need to harness the activity of engaged customers to create better value for everyone." Adam John, senior reporter

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