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26 | 10TH - 16TH MARCH 2017 | UTILITY WEEK Customers Analysis F or those deeply involved in energy retail, the subject of consumer switch- ing is one that can inspire something akin to religious fervour. For many, the volume of domestic cus- tomer switching is the key indicator of a healthy and competitive market with strong engagement. But not for all. In an environment of ongoing and intense market scrutiny, and in the wake of a wave of energy switching reports, a few frustrated voices are calling for a change of focus. Switching, they say, is not the be all and end all – nor necessarily a very helpful indi- cator of customer engagement or fair play when taken in isolation. More needs to be done, argue critics of switch-counters, to understand the broad church of reasons behind why customers choose to switch – or not to switch. There also needs to be acknowledgement that a decline in switching may not be an inher- ently bad thing if it can be attributed to increased customer loyalty and better service from energy suppliers. So what is switching data telling us, or failing to tell us, about the energy retail market today? The latest official data on switching was released by Ofgem on 2 March. According to the regulator, 2016 saw switching levels increase to their high- est level in six years. There were 7.7 mil- lion switching events recorded across the 12 months and 47 per cent of these were to small or medium-sized suppliers – which tend to offer the cheapest deals. Lawrence Slade, chief executive of trade body Energy UK, slapped a seal of approval on these figures, saying they are proof that "competition is working". Energy UK itself had already issued its annual review of switching levels in January, and Ofgem's results broadly endorsed its conclusions that: suppliers must be doing more to engage customers; switching must be getting easier; and that there must be enough diversity across the supplier spectrum to keep people interested in what a new contract might offer them that is different to their previous energy experience. Not all onlookers were so convinced, how- ever, including Ofgem's own chief executive, Dermot Nolan. He welcomed the fact that customers appear to be shopping around more and observed that this should remind suppliers that, "if they fail to keep prices under control or do not provide a good service, they risk being punished as customers vote with their feet". However, Nolan tempered his enthusiasm with an observation that, despite increased switching, the market "is not as competi- tive as we would like", and is still particu- larly problematic for vulnerable customers – hence the introduction of a price cap for customer with prepay meters. Clearly, this measure will do nothing to encourage competition and switching in the prepay market, but it has been deemed nec- essary to protect low-income households and other kinds of vulnerable customers. In the eyes of Citizens Advice – the statu- tory consumer champion on energy issues – Ofgem could go a lot further to make such interventions in the market and worry less about driving up switching. In part, this logic is based on the fact that many of those customers who have never switched are also the UK's most vulnerable energy users – including the elderly and those with low incomes. Rather than trying to prod these custom- ers into engaging with a marketplace they may find threatening and stressful, the gov- ernment, the regulator and suppliers should simply join forces to protect them, says Citizens Advice. Other commentators argue for a reduced focus on switching for different reasons. Ryan Thomson, a partner at consultancy Baringa, says it is "concerning" that switch- ing has become the "'go-to' measure to judge the competitiveness of the market". He argues that "a secure, successful energy market requires more than lots of cus- tomers switching between lots of suppliers. In fact, if the only way customers feel they can get a good deal is to change supplier every year then perhaps we should conclude the market is not working." In short, Thomson says Ofgem and the government need to expand their criteria for energy market competitiveness, placing more emphasis on the actions suppliers are taking to reduce customer bills. The authorities who are so quick to con- demn suppliers for trapping customers in "abusive" relationships (a comment from Iain Wright MP) must acknowledge that "a reduction in switching, if done for the right reasons, is actually a positive sign of a Switching is a numbers game A focus on switching figures doesn't give a full picture of customer engagement and may be indicative of an energy market without a sense of purpose, says Jane Gray. SWITCHING BEHAVIOUR n Less than one month ago n Between two and six months ago n Between seven and 12 months ago n Between one and two years ago n More than two years ago n Cannot remember In January, Utility Week ran its first independent consumer survey to track switching behaviour. More than 1,000 UK adults participated in the research, which was conducted in partnership with Harris Interactive. Here is a range of insights. Recency of switching percentage of switchers Gas Electricity Dual fuel 50 40 30 20 10 0 30% 17% 9% 13% 29% 3% 6% 16% 21% 31% 3% 5% 14% 18% 20% 38% 4% 24% Totals may not be 100% due to rounding