Utility Week

UTILITY Week 27th May 2016

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28 | 27TH MAY - 2ND JUNE 2016 | UTILITY WEEK Customers Market view N ext month, the Competition and Markets Authority (CMA) will end its two-year review of the energy mar- ket. Ofgem announced its decision to refer the energy market in June 2014 because it thought it had not been working in the best interests of consumers. The CMA has since agreed, and its provisional findings show, among other things, that many customers continue to get a poor deal on energy. The biggest area of concern is pricing. Ofgem claims 70 per cent of households are with big six suppliers on the most expensive standard variable tariffs (SVTs), and as a result are paying £325 more than those who are on the cheapest deals. Another key area is in the service and quality energy compa- nies provide. Again, the biggest players oen rank lowest in customer service ratings, and just last month Scottish Power was fined £18 million by Ofgem for "failing to treat its cus- tomers fairly over a sustained period". The regulator claimed the supplier had "failed to provide even the basic level of service required" and as a result the company had received more than one million complaints between June 2013 and December 2015. It is, therefore, unsurprising to see that, according to the most recent public atti- tudes tracker from the Department of Energy and Climate Change (Decc), trust in energy suppliers has fallen in recent months. The tracker reveals that consumers are now less likely to trust their supplier to give them a fair deal, provide a bill that accurately reflects their energy use, and provide impar- tial and accurate advice on energy efficiency. Decc's research also revealed that those least likely to switch to a better deal are over 65. It is a sad fact that older, and oen more vulnerable, customers are more likely to pay over the odds for their energy. Why? The drive towards the best deals being accessed online plays its part. The trust that loyal customers place in their cur- rent provider does too. But fundamentally the issue is that many customers believe the energy market and energy tariffs are so hard for people to understand that many choose to ignore the fact that they do have choice. Flow's own research with a randomly selected section of the UK population found energy tops the list of the most confusing household bills (even ahead of complex mortgage statements), and that over a quar- ter of people are unclear whether they are in credit or debit with their energy supplier. A closer look at our research shows that nearly a quarter of people are not sure whether they are on a fixed or variable tariff, highlighting a clear lack of understanding surrounding even the much-reduced variety of energy price plans. And interestingly, in an age where green solutions are believed to be important, 30 per cent of Brits do not understand the term "fuel mix". To date, energy companies have failed to simplify the energy market and the use of jargon has confused many. But it is not just arcane terminology that is the problem. Difficult-to-compare tariffs, price comparison sites that highlight deals in different ways – all this combines to mean that customers oen do not know whether they are getting the best deal or not. Our research clearly shows that greater transparency and clarity is needed. If consumers cannot understand their bills on a basic level, how can they tell whether they are paying too much? There have been signs that consumers are starting to take note of the greater choice now available. It was revealed last month that British Gas lost 220,000 customers between January and March this year, more than double last year's total. In the same timeframe Flow gained 70,000 new customer fuel accounts. This news highlights the grow- ing appetite for challenger providers with new approaches to delivering gas and elec- tricity. It also helps draw further attention to the fact that a competitive market offering good prices and great service is already out there for consumers willing to engage with it. According to Energy UK, 1.3 million cus- tomers moved from a large supplier to a small one during the past 12 months – the equivalent to 41 per cent of all switches. While this is great to see, it is those who are less engaged in the market, for whatever rea- son, that are suffering the most. This group of consumers needs to be better informed about their energy tariffs, bills and usage. This is where energy suppliers must step in and up their game, in order to tackle confu- sion and turn the domestic energy indus- try into one that is highly regarded and trustworthy. At Flow, we are on a mission to bring clar- ity to the energy market and the first step we've taken is with our bills. We're trans- forming our energy bills to make it easier for people to digest the information and understand exactly where they are with their energy spend, putting them in control. Andrew Beasley, managing director, Flow Energy Cutting through the fog There are signs that consumers are waking up to the fact that real choice exists in the energy market, but suppliers must do more to help them by producing clearer bills, says Andrew Beasley. SWITCHING TRACKER: MOVEMENT OF UK DOMESTIC ENERGY CUSTOMERS Source: Electralink 250,000 200,000 150,000 100,000 50,000 0 Meter points Apr 14 May 14 Jun 14 Jul 14 Aug 14 Sep 14 Oct 14 Nov 14 Dec 14 Jan 15 Feb 15 Mar 15 Apr 15 May 15 Jun 15 Jul 15 Aug 15 Sep 15 Oct 15 Nov 15 Dec 15 Jan 16 Feb 16 Mar 16 Apr 16 Big six suppliers to small suppliers Small suppliers to big six suppliers Big six supplier to big six suppliers Small suppliers to small suppliers

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