Despite the installation of smart meters in millions of British homes, most consumers remain unsure about the impact of their behaviour on their energy bills, research from Ofgem has suggested.
This confusion was one of the findings from meetings held during the second wave of the regulator’s Consumer First Panel, which comprised 100 household customers with a range of tariffs, locations, demographics and incomes.
Panellists agreed that consumers should be encouraged to reduce pressure on the electricity network by shifting usage away from peak periods. However, they struggled to identify what habits they could or would be willing to change personally.
High users of energy – often families with children – expressed the greatest scepticism over their ability to change their behaviour, for example, due to the need to cook meals during the evening and wash clothes frequently.
Most panellists agreed a “tangible financial incentive” would be needed to incentivise behaviour change, and that rewards, rather than penalties, would be more effective.
Some of those who had already tried to reduce their consumption, expressed frustration that they had not seen a noticeable impact on their bill. Many of those with smart meters said they had also expected to see a reduction following the installation but it had likewise failed to materialise.
A majority wanted their electricity bill to be made more transparent so they knew exactly how much electricity was being used by different appliances.
Most also favoured the idea of using traffic light colours – red, amber and green – to signal peak/off-peak times, although some were resistant to the suggestion of being “told what to do”. There were additionally concerns that the inclusion of an intermediate amber light might be confusing.
The overarching aim of the sessions, which were held in 2018, was to gauge opinions on how consumers should be charged for use of the electricity network to assist Ofgem’s ongoing review of forward-looking charges and access arrangements. For the sake of clarity, the distinction between residual and forward-looking charges was not explained to the panellists.
Many were initially surprised to find out that network costs make up such as large proportion of the typical bill (26 per cent) and some were completely unaware it was even a component. “You don’t appreciate it… until you do things like this,” said one participant.
Panellists were divided over how networks costs should be recovered. Some favoured the current system of paying according to usage, saying this encourages people to use less electricity and fairly apportions costs to those who incurred them.
Others, particularly high energy users, said a flat rate would be the fairest option. They argued that lifestyle changes over time – having children, moving house or growing older -would eventually even out usage between customers.
Most instinctively felt it was unfair for consumers to be charged differently based on where they lived, but few were willing to pay more if that was necessary to spread costs evenly. They justified this reluctance on the basis that those living in rural areas with a higher cost of service were making a lifestyle choice that came with others benefits such as lower pollution.
A few of those attending the sessions in Llanelli and Aberdeen were initially supportive of location-based charges until it was explained to them that they might be considered to live in a rural area.
While some participants found it difficult to accept that the electricity network would eventually reach its full capacity, most agreed it should be expanded and were willing to pay a small charge for this. When Ofgem presented an illustrative figure of £30 per year, this was generally agreed to be reasonable and affordable.
Following discussions of vulnerability, participants were also asked to consider an appropriate baseline level of network access that all users should be guaranteed. However, Ofgem said they found this difficult as most struggled to properly appreciate other people’s needs. They typically thought their own usage was essential and should therefore be used as the benchmark.