Retail energy: last chance saloon?
Aug 09, 2018
At an industry conference this week, Ofgem said that the retail energy market was at risk of “becoming a thing of the past”.
A pretty serious assertion from the regulator – so what’s behind it?
This week we take a look at why Ofgem has concerns about the industry, and what can be done to fix it.
“The new government has […] made it clear that industry is in a last chance saloon”
Speaking at Utility Week’s Energy Customer Conference this week, Ofgem senior partner for consumers Rachel Fletcher told attendees that the retail energy industry was in dire straits, and that if action isn’t taken soon the government will be forced to take radical action.
The cause for this concern stems from the high number of customers that remain on SVT’s (standard variable tariffs). The CMA report released last year highlighted that around 2/3’s of customers remain on these tariffs – despite efforts by the government to raise awareness of the benefits of switching.
Underlying all of this, Ofgem argues, is a lack of trust in suppliers, which leads to the apathy and disengagement that has resulted in vast swathes of the population paying more for energy than they should.
Clearly, something needs to change.
So, why don’t customer’s trust suppliers? The answer to this question isn’t one you’ll often find in the mainstream media, and the reason for that is because the answer isn’t a simple one…
The energy industry, its infrastructure and its processes, are complex, and the complexity of the industry is in part a natural consequence of its national scale and importance. This complexity creates several unique challenges for energy suppliers which are difficult to solve, and its these challenges that lead to the vast majority of issues affecting the customer experience, and that lead to the mistrust Ofgem alludes to.
But it’s not just the large scale of the industry that creates challenges for suppliers – one of the main contributing factors is, rather ironically, privatisation.
Before the market was privatised in the early 90’s, the energy market was broken down into regions, and each region had its own supplier. This meant that accounting for energy was relatively straight forward, with all the energy going into a region being attributable to one single supplier.
When privatisation came along it fundamentally changed the way energy should be accounted for, with anyone from any region being able to choose their supplier. This demanded a much greater degree of granularity over how much each supplier’s customers were consuming, and where they were consuming it. But whilst the energy landscape has changed dramatically for consumers, the actual infrastructure and industry processes have remained the same. This has meant that the invoices suppliers get from the industry are aggregated to the regional level, whilst the bills they issue are based on costs at the customer level. This drives a disparity between the two views of the world – industry and customer – which in turn creates various problems for suppliers.
It’s this disparity, and the problems that come with it, that lead to a bad customer experience and mistrust in the system.
How do suppliers regain the customer’s trust?
If consumers are disengaged because they mistrust suppliers, and if suppliers are mistrusted because they are grappling with industry facing challenges, the answer is simple. To regain the trust of consumers, suppliers need to regain control of their industry interactions.
This is the exact challenge that ENSEK set out to address when they were founded in 2010 – to bridge the gap between industry and consumer, and improve the customer experience.
By intelligently piecing back together the vast array of data that is transacted between participants in the supply chain, ENSEK has created a powerful energy data reconciliation engine, called Libra, that can accurately show costs at a meter level right the way up to the aggregate industry view.
Enabling this level of granularity enables a transformational shift in the way suppliers operate – allowing them to bill more accurately, resolve industry exceptions more effectively, and ultimately improve the customer’s experience.
Powered by Libra, ENSEK is helping new entrants and existing suppliers build trust with their customers.
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