More Competition Could Improve Energy Industry

A recent government study showed that 43 per cent of energy customers have never switched supplier. In the wake of that news, Ofgem are reviewing a new Next Day Switching service to make it easier and more attractive for customers to switch energy providers.

Over six million domestic energy supply accounts were switched in 2015, a 15 per cent increase on 2014, according to Ofgem, the Government regulator for gas and electricity in Britain. With savings of around £330 a year for switching to a different tariff or supplier, consumers are being more proactive at looking for better energy deals.

Sam Dean, Business Development Manager at IMServ, one of the UK’s largest independent energy data management providers, believes market competition will lead to greater innovation and improved customer experience, but has concerns over the feasibility of the timing.

Sam Dean explains: “Ofgem wants energy customers to be on the best deal and is keen to alleviate some of the switching complexities that currently exist.  To help customers get on the most cost-effective tariff and give greater choice, the energy regulator is recommending Next Day Switching.

“This will enable customers, including domestic, non-domestic and encompassing dual fuel users to switch energy suppliers within 24 hours by 2019.  There are so many different types of tariffs that it can be confusing; from prepayment, fixed, capped, standard and green tariffs. A simple swap involves over 20 pages of processes even without the complication of dual fuel, prepayment or more complex swaps. In our experience customers do want to be able to switch easily and also want data transparency to help manage their energy consumption.

“In principle, the idea is a sound one. Making the process easier will strengthen competition, provide more choice for the customer and will undoubtedly lead to more innovative services, which is good news for the customer and the industry. But, the task is a mammoth one and it’s important it’s not underestimated.  Gaining insight and ideally input into Ofgem’s work streams will be helpful and the regulator should engage with as many organisations as possible to make the roll out as smooth as possible.  

“However, the ability to achieve Next Day Switching by 2019 is unrealistic and the volume of work needed to simplify a more straight-forward pricing structure is significant. It is also dependent on the roll-out of smart meters, the majority of which are expected to be installed by energy suppliers by 2020.”

IMServ monitors 250,000 metering systems remotely, covering 25 per cent of the UK’s entire electricity consumption and collecting some 80 billion units of energy data per year. IMServ

offers its top five tips on areas that need to be considered before the Next Day Switching service is implemented:

– Industry interaction and involvement is key.

– Realistic timescales to implementation is critical.  A phased approach may be more favourable to the industry, which is currently undergoing a lot of change with smart rollout, billing and settlement systems.

– Understand the full reasons for the reluctance of the consumer to switch energy supplier. This insight will be critical to stimulating consumer’s appetite to switch suppliers.

– Keep it Simple. Don’t overcomplicate the process. Next day switching needs to be seamless and simple, especially for the domestic market.

– Learn from other industries that have undergone this change process, for example, banking.  What problems did they experience, did it improve customer demand to switch providers?

Sam added: “The current switching process relies on systems that operate separately and were developed in the 1990s. The time has come to integrate the gas and electric markets to provide customers with access to cheaper tariffs and a more straightforward service. However any integration must deliver flexibility and transparency rather than greater levels of complexity at a cost.”