The regulator has begun research into the measure after it was recommended by the Competition and Market Authority in its final remedies in June. It is also looking at alternative ways of prompting consumers to switch.
“We will only launch the database if we’ve got a solution that’s having a material impact on consumers and brings about the sort of benefits we know are needed,” said Ofgem senior partner for consumers and competition Rachel Fletcher.
The measure would see customers who have been on a standard variable tariff for more than three years added to a cloud database which would be accessible by all suppliers. The suppliers would then be able to directly market to these ‘sticky’ consumers. Marketing would only be allowed by post and customers would be able to opt out of the database.
Speaking at the Utility Week Congress in Birmingham, Fletcher said the database would be a “challenging” remedy to implement: “There’s lots of complexity in it: technical complexity, data security, information protection, law, as well as the challenges… around particular consumers who’ve got particular needs. We are going to work through all of those.”
Ofgem has already begun research to gain a better understanding of consumers’ needs. “We’re starting right now with what I think of as a sort of lab testing, where we’ve mocked up what it might feel like as a consumer to be on the database and see how people start reacting,” said Fletcher.
The regulator will soon build a prototype database so it can test variants with “hundreds of customers”. It is liaising with consumer groups over the measure and is looking to do the same with suppliers, she added.
Alongside work on the database, it is also looking into “a series of prompts to engage through other means” in order to “find out what the best package of measures for engaging consumers”. “We don’t have all the answers,” said Fletcher. “We don’t claim to. But we are committed to carrying out the process that will get to an outcome that works.”
Independent suppliers have been particularly vocal about their disdain for the CMA’s data-sharing remedy, who say it will result in many customers receiving unwanted marketing information, and may further dissuade them from switching suppliers.
In March, following the publication of the proposed remedies, Ovo Energy said it is “unlikely” that increasing the frequency of supplier communications to customers represents a long-term solution to improving levels of engagement in the retail energy market.
When the final remedies were published, Ecotricity said it will fight the remedy. Chief executive Dale Vince told Utility Week he believes it is “a nonsense idea”, and “something that we don’t intend to take part in”.