The often heavily whiskered Victorians whose portraits line the walls of the Institute of Mechanical Engineering (IME) were the forebears of the people who created the centralised energy system we have all grown up with.
However, ensuring we get a fair deal in the decentralising market that is emerging today was the subject of a conference held by Ofgem at the IME’s august headquarters in Westminster earlier this month.
One of the speakers was Will Hodson, who along with his business partner scooped the biggest ever payday in the history of the BBC’s Dragon’s Den. Last summer the pair persuaded two of the show’s judges to invest £120,000 in return for just a 3 per cent stake in their auto-switching platform website Look After My Bills.
Having been previously involved in food and consumer initiatives, Hodson is puzzled about how the energy supply market works. “The energy market is so bizarre. It doesn’t function as economic textbooks suggest, which is that people should move rapidly to best prices,” he said.
Sacha Deshmukh is another relatively new entrant to the industry, having worked in advertising before being appointed chief executive of Smart Energy GB.
The introduction of Ofgem’s cap on standard variable tariffs (SVTs) illustrated the “unusual” nature of the energy market, he said: “It’s not normal in most marketplaces for the regulator to have to help most of us. It’s odd for there to need to be an involvement by the regulator.”
But this reflects the peculiar characteristics of the energy market, said Deshmukh. “In most marketplaces engagement is effortless. It’s unusual to have a highly interested customer in a low interest category.”
Hodson agreed: “If we leave consumers to their own devices, they don’t get the key outcome they want out of the energy market, which is a good they are after for a fair price.
“Only about 10 per cent of the nation can stay on the treadmill of switching. Switching once isn’t enough: you have to keep switching again and again and few people do it, which shows why automatic switching has emerged.
“Entire business models depend on squeezing customers. People described as energy suppliers in a lot of cases aren’t supplying energy, they are just taking responsibility for the bill,” he said, adding that his site already has 90,000 users.
Demands on networks
Suleman Alli, director of safety, strategy and support services at UK Power Networks, told delegates the growth of renewable technologies is transforming his business.
He said in recent years 6GW of new capacity had been connected to his company’s networks, an increase in capacity equivalent to two Hinkley Point C nuclear plants.
Demand is evolving fast too, thanks to the 60,000 new electric vehicles (EVs) now operating in the areas covered by the company’s networks. “It’s changing our operating environment. To stay relevant we have to adapt our business processes and the way we think and operate,” said Alli.
Increased EV uptake will be a “trigger point” for changing how customers engage with the sector, he predicted.
In London, the extension of mayor Sadiq Khan’s ultra-low emissions vehicle zone to the north and south circular orbital ring roads will force many households to exchange their old, polluting diesel cars for electric or hybrid options, Alli said: “Suddenly you will no longer be spending £35-40 a week on diesel, you will be charging your vehicle: the routine of doing that is going to make you think about energy consumption more than you do now.”
One of the issues that must be considered is whether those making money from on-site renewables should be allowed to “free ride” on the backs of a grid paid for by all customers. He said: “If you are using the system to sell to someone, perhaps you should pay a fair cost to do that: it should not be free.”
But while energy may be moving into a Jetsons world of digitalised and futuristic innovation, Hodson told delegates that The Flintstones is a more apt description of many customers’ engagement with the industry.
Gillian Cooper, head of energy policy at Citizens Advice, agreed. “We need to be realistic about the levels of engagement. New products and services coming to market will be lot more interesting to people but they won’t be interesting to everyone.”
Garry Ratcliffe, self-styled gay dad and headteacher, gave the conference an insight into the bread and butter energy requirements of raising four disabled children.
The combination of more frequent washing of clothes and bedding, together with having to keep the home at a constant temperature, means higher energy bills, he said. “To keep our children healthy, we have no choice in using lots of power. It’s never something to be compromised on.”
He added that for heavy users of energy, savings are usually a lot smaller than those quoted on switching websites
Ratcliffe, who acts as an ambassador for disabled people’s charity Scope, urged suppliers to introduce a disabled family tariff. Disabled households typically pay £5.70 extra a week on average than their able-bodied counterparts, said Minesh Patel, policy and campaigns manager at Scope. And suppliers should get better at targeting support at disabled households, he said: “Over half of disabled people are not identified as vulnerable customers.”
These kinds of problems lie at the root of a trust deficit, which fuelled the uproar over energy prices that ultimately resulted in the SVT cap, said Matthew Vickers, chief executive of the Ombudsman Service.
He said: “It doesn’t matter which bit of the service fails, it erodes trust across the system as a whole. If one part of the system fails it has a really damaging impact. Unless we have trust, it’s not going to work.”
Building trust in utilities is a key theme of Utility Week’s New Deal for Utilities campaign. Follow the campaign online at www.utilityweek.co.uk.