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UtILIty WEEK | 2nd - 8th May 2014 | 27 Customers Market view F inancial services regulators have spent more than a decade trying to clarify what the licence obligation to treat cus- tomers fairly means in practice. And they are still going. However, energy companies can draw three key lessons from the financial services sector as they implement the new treating customers fairly (TCF) obligations. The first is, what does "treating customers fairly" mean? The second is, how do you measure it? And the third is, what types of tools have financial services firms developed to help them meet their TCF standards? Ofgem's Retail Market Review (RMR) was aimed at driving competition and transpar- ency by making "the market simpler, clearer and fairer for consumers". Now suppliers are restricted to four core tariffs. Information on customers' energy use must be clearer and allow easy comparison between suppliers. Finally, new standards of conduct went live on 26 August 2013, requir- ing energy suppliers to "…ensure that each domestic customer is treated fairly" in all regards (the TCF obligations). The TCF obligations pervade all aspects of suppliers' new RMR duties. In that sense, they are the foundation on which the rest of the RMR requirements rest. The requirement to treat customers fairly was first introduced in the financial services context in 2001, when the Financial Services Authority (FSA) assumed responsibility for conduct regulation. In the early years, com- panies produced and implemented their own TCF policies, but companies and regulator alike found that defining what TCF actually meant was immensely challenging. From the user's perspective, how- ever, it turned out to be simple. A 2005 FSA-commissioned survey showed that consumers wanted: to get what they paid for; not to be taken advantage of; to be offered the best product available; to be able to contact their provider without undue delay; to have any mistakes resolved quickly; to be shown empathy and flexibility in the firm's dealings with them; and to be communicated with in clear and straightfor- ward language. The TCF duty extends beyond the point of sale to cover the entire "product life- cycle". The false perception that TCF began and ended at the point of sale has been one of the most significant causes of regulatory strife for financial services suppliers. If TCF is difficult to define, it is even harder to measure. Financial services firms have laboured to identify TCF metrics with which to measure their progress. The metrics they did identify that may be applicable to energy suppliers include whether and how: • customers' genuine demands and needs have been considered as part of the pro- cess of designing new products or pack- ages for customers; • TCF has been considered in the process of designing the sales process (includ- ing any telephone scripts used to sell products); • customer-facing staff have been trained and assessed competent on the practical implications of the company's TCF duty for their individual roles; • any standard form written customer communications are routinely checked to ensure the language is clear and not misleading; • staff remuneration is linked to fulfilment of TCF-related objectives; • customer complaints data is analysed for root causes; • action is taken to address any root causes for customer complaints that have been identified; • the company's governing body regularly receives and discusses complaints data analysis; • any outsourced service providers are audited for compliance with the com- panies' TCF policy, rather than simply required by a contractual provision to comply with the TCF policy. Other metrics will be specific to the indus- try, or even the business. It is an essential first step in implementing any TCF pro- gramme across an organisation to brain- storm the potential additional TCF metrics applicable to energy supply (that is, com- munications connected with energy savings, or regular reassessment of tariff values) and assemble an agreed list of TCF metrics to help define and measure success. Finally, having assembled a list of TCF metrics, it is important to have effective procedures for collecting and assessing the information that will tell you whether or not you are successfully delivering on them. "Effective" need not mean complex. Transparency need not mean information overload. In fact, simplicity has been key for financial services firms. Many financial services suppliers use a document known as a TCF Dashboard to measure (oen monthly) performance against their TCF metrics. The dashboard provides a visually powerful summary of TCF health for management. Such dashboards oen use a red-amber-green coding system to highlight areas for improvement. This allows targeted resource allocation for prob- lem areas, thus addressing issues quickly and efficiently. The use of TCF champions is common, with the TCF champion usually responsible for gathering and reporting TCF information for the dashboard. Using a business-person as TCF champion helps achieve commercial buy-in for compliance efforts. Moreover, the role can be coveted. For example, the TCF champion has the opportunity to raise their individual profile within the firm and par- ticularly before its managing body. As such, TCF champions are usually not hard to find. The lessons learned in the financial ser- vices sector are highly relevant for energy suppliers in implementing effective TCF policies. The whole-of-life obligation of the duty; the apparently simple customer expectations of transparency, fair treatment and charges, and accessibility; and the innovative tools for measuring and delivering fair treatment are not unique to financial services. For energy suppliers, putting the TCF duty into practice – and communicating that to Ofgem and customers – will be central to success. Andrew Hockley, James Marshall and Polly James, Berwin Leighton Paisner LLP Forced to be fair Energy companies can learn a lot from the financial services sector when it comes to regulatory obligations to treat customers fairly, say Andrew Hockley, James Marshall and Polly James.