Utility Week

UTILITY Week 11th November 2016

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12 | 11TH - 17TH NOVEMBER 2016 | UTILITY WEEK Policy & Regulation Market view M ost of us are aware of the market remedies that the Competition and Markets Authority (CMA) has given Ofgem to implement. I'm not going to criti- cise the CMA for its intent: the fact that half of UK households have never changed energy supplier, nor show signs of wanting to, is a headache for anyone who wants to see a dynamic, competitive and innovative energy market. Persuading consumers to engage in the market, one of the CMA's key aims, is clearly in the best interests of customers and most, if not all, market participants. Now, there is some cause for optimism. Annualised switching levels have risen from about 13 per cent of the market two years ago to 18 per cent today. Yet the widening of the average margin between the major incum- bents' cheapest price offerings and their standard variable tariffs from 14 per cent in April this year to 20 per cent today suggests consumer disengagement is relied on, in big six boardrooms, as a way to maintain mar- gins while slowing market share decline. But giving Ofgem the job of regularly pub- lishing a database of all energy customers who have been on suppliers' standard vari- able tariffs for three or more years strikes me as a particularly muddle-headed way of try- ing to solve this. This remedy is likely only to make the symptoms worse. If consumers haven't yet been engaged by all the price messages they've already been receiving, then a blizzard of leaflets dropping through their door, or yet more unsolicited email, seems unlikely to change that. Indeed, with doormats up and down the country pil- ing up with home energy-related direct mail, disengaged customers seem likely to become disenchanted junk mail recyclers – alienat- ing them from the energy market still further. However, we at Ebico have a more par- ticular concern. We fear that the first result of Ofgem's deployment of the disengaged cus- tomer database remedy will be the creation of confusion and stress among vulnerable cus- tomers whose first question is going to be, 'is there a problem with my energy supply?' The Data Protection Act 1998 and the new General Data Protection Regulation exist, aer all, so that organisations may not use personal information, especially for market- ing purposes, without the individual's con- sent. As a social enterprise founded to tackle fuel poverty, we know that many customers do not switch on price alone. If consumers haven't yet been engaged with all the price messages they've already been receiving, then energy providers need to get their acts together and create more of an emotional or values-based connection to attract them. If politicians are as concerned as they say they are about the prices being paid by consumers who won't, or can't, make use of the competitive home energy market, then the answer is simple: regulate the difference between the price a supplier can charge for its cheapest tariff and the price it can charge for its standard variable tariff. Marko Bjelic, digital marketing manager, Ebico Right target, wrong approach Setting up a database of customers who steadfastly refuse to engage in supplier switching is an exercise in futility, says Marko Bjelic, who argues for a modicum of price regulation instead. Supplier switching movements In September 2016, of all switches: ● 32% were from larger to small and mid-tier suppliers. ● 13% were from small and mid-tier to larger suppliers. ● 43% were between larger suppliers. ● 11% were between small and mid-tier suppliers. CUSTOMER SWITCHING BETWEEN SMALL AND MID-TIER AND LARGE ENERGY SUPPLIERS 500 400 300 200 100 0 Customer switches (000s) May 12 Jun 12 Jul 12 Aug 12 Sep 12 Oct 12 Nov 12 Dec 12 Jan 13 Feb 13 Mar 13 Apr 13 May 13 Jun 13 Jul 13 Aug 13 Sep 13 Oct 13 Nov 13 Dec 13 Jan 14 Feb 14 Mar 14 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 May 16 Jun 16 Jul 16 Aug 16 Sep 16 Larger to small and mid-tier suppliers Small and mid-tier to larger suppliers Small and mid-tier to small and mid-tier suppliers Larger to larger suppliers Source: Electralink

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