Utility Week

UTILITY WEEK | JULY 2022 | 15 Energy in association with What does competition look like in the future? For years Ofgem and the government have repeated the mantra that customers should constantly be on the lookout to switch to a cheaper deal. The rise of the price comparison websites (PCWs) and the cult of Martin Lewis have re-enforced this obsession with cheap prices, with switching rates highlighted as a primary indicator of a healthy competitive market. When the Department of Business, Energy & Industrial Strategy (BEIS) published its energy retail strategy in the summer of 2021, Utility Week reported widespread dismay from the sector at its focus on auto-switching as the best way to ensure disen- gaged customers are not le‡ behind. The events of 2021, and the harsh new reality that has emerged in 2022, has changed this dynamic com- pletely. While switching activity has started to pick up, there is simply nothing to choose from between the prices currently on the market. A glib indicator of the scale of change in the market was Uswitch's decision to rebrand itself in marketing about its energy services as "U-stay-put". However, Richard Neudegg, head of regulation at Uswitch, told Utility Week's Customer Summit in March that appetite for switching remains "staggeringly high" and now includes many previously disengaged consum- ers waiting for the right opportunity. He sees the current situation as an opportunity for all players in the market, including price comparison websites, to evolve beyond a focus on price. He points to its accreditation scheme for green tari" s as one way in which Uswitch is highlighting other metrics customers can use to di" erentiate between suppliers. He warns that "consumer engagement is not guaran- teed", adding: "There is a real risk that consumers learn new habits and we don't build on the good stu" we see in terms of engagement and transition that to the much bigger decisions around net zero. Ofgem and policymak- ers have to consider a bunch of really di– cult trade-o" s – supplier stability is really important but there is a risk that in the name of supplier stability we go too far in sof- tening the level of competition. I don't mean we want to return to progressively ridiculous pricing from a bunch of new entrants, but we are going to need incentives on suppliers and consumers to innovate and transition to Comment Amy Marshall Amy Marshall, head of consumer energy, PA Consulting T he UK's competitive retail energy sector has been rightly held up as a success story and it is clear that the sector has been reshaped over the past half decade or so by competitive forces. Di" erentiated retail energy business models and the impact of the energy transition on consumer energy have reinvented how customers think about their energy suppliers. In response energy retail- ers, both new and established, have had to examine the fundamentals of their brand, customer service and use of technology. Recent events have highlighted structural challenges and shortcom- ings across the board but have also created a perfect storm of consumer interest in energy. There has never been a better time to reframe the market for customers, for our security of supply and in pursuit of net zero. The š ndings of this report both support the need for change, and o" er speciš c suggestions for action. "There has never been a better time to reframe the market" "There has never "We need to rethink completely what is the role for the price cap, which customers do we want to protect and what type of consequences it has on the customers that are unable to pay their bills." PHILIPPE COMMARET, MANAGING DIRECTOR OF CUSTOMERS, EDF ENERGY, ON REGULATORY REFORM QUOTED FROM THE REPORT new services and we'll still need new entrants to change the game." Energy UK deputy director Dhara Vyas describes a market predicated on switching as the primary measure of engagement as "not š t for the 21st century". Like Neu- degg, she points to the "really exciting opportunities" that exist for consumers willing to engage with a œ exible energy system and envisages a world in which these are the incentives to switch as opposed to price. However, she caveats that it is vital consumers are not penalized if they do not want to engage with these types of services. Alex Belsham-Harris, a principal policy manager at Citizens Advice, agrees that protections must be in place for those who do not have the conš dence to engage or for whom there is a š nancial barrier. "We need to enable people to engage as much as possible, but also we can't really allow a situation where some people fall further and further behind everyone else. Politically it's unsus- tainable because people will think that decarbonisation e" orts are making it unfair." He adds this would also need a very di" erent approach from the regulator's, which "doesn't really have a clear view on specialisation". He points out that it has allowed some companies to operate outside of wider market rules by essentially turning a blind eye. As an example, he cites now defunct online-only retailer Pure Planet, which operated outside of Ofgem's rule that cus- tomers should be able to contact their supplier by phone. He says: "We think Ofgem could do more to be upfront about where it thinks there are beneš ts of com- panies specialising and where it thinks, 'actually no, all companies need to do this, this way, because it's the best way to deliver to customers'. At the moment it doesn't really have that clear view of where it thinks specialisa- tion should be allowed, versus where we need a sort of homogenous approach." For Citizens Advice, switching shouldn't be the only metric of success in the market but Belsham-Harris sup- ports it as "an important feature of the market for some people as a way of saving money". He says a wider con- versation is needed about what a traditional energy con- sumer gets out of competition in the market. Building trust The other side of the coin to competition is loyalty, with the ideal market conditions allowing consumers

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