Many of us were still digesting Ofgem’s proposed new checks and tests for energy suppliers when, just over 24 hours later, Toto Energy became the 16th smaller player to collapse since the beginning of last year.
Toto’s demise offers another reminder, as if it were needed, of the challenging market conditions facing energy suppliers in 2019.
Some will no doubt see Ofgem’s reforms as simply adding to the burden, but for me they represent an opportunity to build consumer confidence in the sector – and in smaller suppliers specifically.
These disruptors have brought welcome innovation and challenge, but some have faced growing pains.
The seemingly ever-growing list of supplier casualties won’t have gone unnoticed by consumers. Indeed, there’s evidence – for example in the latest switching figures from Energy UK – that smaller suppliers are losing arguably the most valuable currency in the energy retail market: trust.
Challenger brands have gained great traction within the retail energy market in recent years, bringing with them attractive deals and incentives, alongside innovative technology and customer-centric operating models.
However, with the recent string of supplier failures and constant speculation about which company might be next, consumers could hardly be blamed for choosing a household name when searching for an energy deal.
Solarplicity customers who were transferred to Toto shortly before Solarplicity’s demise, only to see that company cease trading, will no doubt be hoping for a period of stability with EDF.
The question of how smaller suppliers can regain the trust of consumers is one for the people running these companies to answer, but for me it all comes down to transparency.
Price clearly matters to consumers. However, it’s increasingly evident that customer service is an important consideration for today’s energy consumer. A volatile market may see consumers increasingly seek assurances in the arms of brands they trust to do the right thing.
For us as the Energy Ombudsman, transparency on the part of suppliers means making customers aware of their right to escalate a complaint to us if it can’t be resolved in-house. We call this signposting.
Under industry rules, all suppliers must signpost their customers to us. Many do this effectively, but there are signs that some smaller suppliers might not always follow the correct process – possibly due to a lack of awareness.
Given that almost 50 per cent of the complaints we’ve received this year have been about small firms – compared to less than a quarter in 2017 – it’s clear that smaller suppliers need to take signposting just as seriously as their larger counterparts.
Clear signposting and expectation management from suppliers are strong indicators of good intent. Where these things are evident, consumers can be assured that their needs and interests are being catered for.
Ofgem’s proposals for new reforms for existing energy suppliers to drive up customer service standards, reduce the risk of supplier failure and strengthen the security net are very welcome and much needed.
As the Energy Ombudsman, we’d particularly like to see close attention being paid to the issue of signposting, so all consumers are made aware of their right to come to us when a complaint can’t be resolved.
We’d also like to see Ofgem focus on protection for consumers with complaints logged with us when a supplier fails. Often in these cases, consumers are left stranded with nowhere to turn.
A robust and effective energy market is in the interests of all parties. The real test now will be to strike the right balance between a market that values innovation and competition, and one that has consumers and consumer trust at its heart.