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20 | 5TH - 11TH MAY 2017 | UTILITY WEEK Policy & Regulation Market view T he Competition and Markets Author- ity [CMA] presented its Energy Mar- ket Investigation Report to Ofgem in June last year. Its view is that Ofgem should initiate a programme that will bet- ter inform customers about their options and encourage them to act, but also advises involving suppliers and third party interme- diaries in strengthening domestic customer engagement. In addition, the CMA is calling for an ongoing programme of identifying, test- ing and implementing measures to promote engagement in the domestic retail energy markets, along with the introduction of a licence condition requiring suppliers to par- ticipate in the programme. Only 15 per cent of households regularly switch energy sup- pliers and, while switching reached a record high in 2016, this still represents just a frac- tion of households that could be enjoying more favourable tariffs. Clearly Ofgem wants to see a far more competitive market and we wait to see to what extent it takes up the CMA's recom- mendations. We do know, however, that the regulator plans to implement the database remedy, which should go live in 2018. A group of customers from two suppliers are currently participating in an Ofgem trial in which marketing offers from other suppliers are being sent to one group, while personal- ised energy deals are being sent directly from Ofgem to the other group on behalf of other suppliers. The test will identify how many customers opt out and how many switch. There will apparently be more detailed research to understand the customer experi- ence of taking part in the trial. It is essential that such trials are properly controlled and managed. Science shows us that when our expectations and reality do not match we experience stress. Crucially, this response can be triggered by any unex- pected experience – even if it is a good one. So, if a customer receives a letter (unsolic- ited, so the assumption is that it is junk mail and therefore could already be an irritant) offering them a great deal on their energy, it is quite possible they will experience a tripping point and as a result, a negative response to the offer. We know people do not always behave in rational ways. Even though they know they can save money they will oen walk away from a great offer. Indeed, our own recent research into why customers don't switch their energy suppli- ers more oen bears this out. Furthermore, research shows people do not say what they truly think and in many cases are not actu- ally aware of how their unconscious brain is influencing their behaviour. This means any additional research based on simply asking questions may also be misleading – a survey question will produce a rationally-filtered response that may have little or no bearing on the actual cause. If and when the database remedy rolls out, it will have major implications for sup- pliers, especially the larger ones which are traditionally slower to adapt. Providers should not wait until change is imposed on them by Ofgem. Rather they should be look- ing now at ways to differentiate themselves, to provide not just the best price, but the best service. It is understandable that providers would want to capitalise on their customers' resistance to shopping around and steer well clear of drawing attention to how much cus- tomers are paying. In future, energy suppliers will have to provide a better customer experience or be drawn into a price war. Ofgem might well require them to provide annual reviews, for example, as in the insurance market, giving customers the option to do nothing and auto- renew, or provide the motivation to look for a better deal with all the relevant information at their fingertips, a service that customers would no doubt appreciate. So providers should start engaging with customers now, offering services free of trip- ping points, which nurtures and creates a loyal base of customers who choose to stay with their provider because of the experience it provides and who genuinely believe they are getting the right deals and service – not necessarily based solely on being the cheap- est. This will be essential in providing some defence against competitors who will have open access to their most profitable custom- ers – those on standard variable tariffs and currently the least likely to switch. Tim Routledge, chief experience officer, Experience Insight Act now on the CMA's report The CMA has provided a list of market solutions for Ofgem to mull over, but suppliers should take them on board now and act before they are forced to, says Tim Routledge. Key points Ofgem wants to implement the CMA's "da- tabase remedy" in 2018 and is conducting customer trials to test its effectiveness. Suppliers must be aware of the science behind sending unsolicited mail, regard- less of how good the offer is. Customer service is the differentiator that can stop a provider being drawn into a price war. Key CMA recommendations • Encouraging consumer engagement with the market through better communica- tion to inform customers of their options and the benefits of switching, and making switching quicker and easier. • The banning of complex tariff structures, the four-tariff rule, restrictions on the offer of discounts and restrictions on the offer of bundled products. • All suppliers to make all their single-rate tariffs available to domestic customers on any type of restricted meter, without mak- ing switching conditional on a restricted meter being replaced, and to provide additional information to customers on restricted meters. • The "database remedy" – an Ofgem- controlled database of "disengaged customers" on default tariffs, accessible to rival suppliers who can then get in touch with the customer directly and offer better, personalised deals.