Alongside the growing demand for leadership in tackling climate change, arguably the most profound shift to have taken place in the utilities industry over the past five years has been the migration of responsibility from state to industry for safeguarding the most vulnerable members of our society.
Though utilities have long shown concern for customers with challenging circumstances – whether these are caused by financial difficulties or physical and mental disabilities – it is only more recently that it has become a requirement for firms to show distinct capabilities in the provision of support to an increasingly broad interpretation of consumer vulnerability. For example, Ofgem’s introduction of an enforceable vulnerability principle in its standards of conduct for domestic suppliers, and the inclusion of incentives for serving vulnerable customers within the network-focused Broad Measure of Customer Service.
By and large, utilities express a keenness to embrace the new weight of expectation that has been placed on them as private providers of lifeline services. However, as became clear at Utility Week’s Consumer Vulnerability Conference in June, the reality of doing so does not always lead to a warm fuzzy feeling of satisfaction with an important job well done.
A complex challenge
Providing high quality support and inclusive services for consumers in vulnerable circumstance is a complex challenge. First off, vulnerability includes a broad range of permanent and transient customer issues that can be difficult to identify and monitor.
Once consumer challenges have been identified, there can be obstacles to overcome in terms of convincing customers to accept this – few people like being identified as vulnerable and many are suspicious of utility generosity. And then the ultimate challenge, devising suitable responses to vulnerability in a way that does not unacceptably impact the cost-of-service provision to the customer base as a whole.
Our June conference heard that utilities are making great strides to overcome these challenges. In an increasingly data-rich world, advances are being made in effectively gathering and sharing consumer data so that utilities can gain greater collective visibility of the shifting vulnerabilities of individuals and co-ordinate their efforts to support them.
A presentation from Western Power Distribution’s stakeholder engagement manager, Alex Wilkes, highlighted the top performing network’s focus on collecting and monitoring consumer data for signs of vulnerability and how this information is leveraged effectively in partnership with third parties.
The conference also provided brief insights into the ongoing work to develop a shared priority services register across energy and water utilities – a scheme being co-ordinated by governance body Electralink. The shared register is due to go live in April 2020.
Presentations and debate also highlighted a growing consensus that effective support for vulnerable customers is best devised by first understanding the “lived experience” of consumers with a variety of vulnerability “types” and designing “needs-based” solutions. This represents a shift away from a more vertically focused approach to designing support and accessibility around specific definitions of vulnerability.
This rising focus on lived experience is a positive outcome of collaboration between utilities and trusted partners in the third sector – which speakers and delegates at our conference agreed is essential to the effective delivery of support and design of inclusive, empowering services.
However, according to Katie Evans, head of policy and research at the Money and Mental Health Policy Institute, there is still a lot more to do in raising the quality of utility company partnerships with charities and the consistency of their outputs. This was an opinion echoed in recent recommendations from the Commission for Customers in Vulnerable Circumstances.
So it was worrying to hear Centrica’s director of vulnerable consumers, Steve Crabb, suggest that some suppliers are pulling back from their charity partnerships in response to the squeeze the energy price cap is putting on retail margins.
It wasn’t the only worry about the potential for market developments to negatively impact on the experience of consumers most in need. Ofgem’s Meghna Tewari acknowledged a burgeoning debate in the energy market about the effects of system decentralisation and decarbonisation on social equity and the scope for these transformation drivers to create new forms of vulnerability.
Are social tariffs sustainable?
Meanwhile, representatives from the water sector worried that current approaches to funding social tariffs have become unsustainable and are perpetuating perceptions of “postcode lottery” support for an increasing volume of financially vulnerable households.
Overall, Utility Week’s Consumer Vulnerability Conference highlighted the deeply committed attitude of most utilities to supporting and empowering consumers in vulnerable circumstances. But it also exposed a niggling concern that a changing market environment (including downward pressure on margins and returns as well as transforming systems and business models) could negatively impact the ability of utilities to accept the shift of responsibility for social care on to their shoulders.
In this climate, questions about the need for a new social contract to guide utility strategies and regulatory principles – identified in Utility Week’s New Deal for Utilities campaign earlier this year – need urgent consideration.
Suppliers are cutting vulnerability support under price cap pressure
The conference comment that created Utility Week headlines came from Centrica’s director of consumer vulnerability, Steve Crabb.
According to Crabb, the price cap is having a “devastating effect” on the energy sector and is impacting on the resources made available for work with the third sector on vulnerability challenges.
Crabb, who has since departed Centrica, emphasised that his views were his own rather than his employer’s. But he warned those gathered at the conference, including regulatory leaders, that the default tariff cap is putting at risk much of the positive steps suppliers have been taking in recent years to improve support for those customers most in need.
Crabb’s contribution came as part of a penal debate on how utility companies can make bills affordable for all.
He said: “The anecdotal evidence I am getting is that the price cap is having a devastating effect. Many charities that work in partnership with energy suppliers are saying their funding is drying up. It’s causing real strain on energy suppliers so I’m worried that the effects of the price cap could see a reversal of a lot of the things that have been done around consumer vulnerability over the past few years.”
Also on the panel was Rob Salter-Church, Ofgem’s director of retail transformation, who was involved in the implementation of the price cap.
He responded: “We believe the price cap is delivering on a lot of the objectives set out. In the first year we expect the tariff cap will save consumers somewhere in the region of £1 billion.
“Another thing it is trying to do is drive efficiencies in the sector. We set the cap at a level that presented a challenge to the sector and that challenge was to become more efficient.
“It’s sad that maybe the place energy companies are going to achieve those efficiencies is to cut some of the support they are giving to vulnerable customers – either directly or through the charities they work with.”
He stressed that Ofgem was committed to keeping the price cap under review and would be monitoring in particular how suppliers treat vulnerable customers.
- Ofgem update: The regulator’s head of consumer policy, Meghna Tewari, provided insight into Ofgem’s updates to its vulnerable consumer strategy, including work on an analytical framework to consistently assess the impact of its policies on particular vulnerable groups.
- Lord Whitty: Explanation of recommendations made in the recent report from the Commission for Customers in Vulnerable Circumstances. This included a strong focus on achieving consistency in the quality of service vulnerable consumers get, via setting clearer expectations and enforceable standards, but also improving the approach utilities take to their work with the third sector.
- Affordability debate: An animated panel session posed some controversial suggestions for tackling affordability. The debate raised challenges to Ofgem on the unintended consequences of the energy price cap and to Ofwat on the viability of using social tariffs.
- Technology and vulnerability – insights from Octopus: The highest rated session in delegate feedback, this presentation showed how a flat management structure combined with a nimble approach to technology is allowing Octopus to provide outstanding levels of inclusiveness in its services to all customers – including those in vulnerable circumstances.
Comment Heather Nowak
Scheme manager, BSI
“We need a common framework across the utilities sector.”
Vulnerability can impact anyone. As we now know, one in four adults in the UK suffer from poor mental health. Every two minutes in the UK someone is diagnosed with cancer and almost half of adults don’t have enough savings to cover an unexpected bill of £300.
So how can the utilities sector help? Throughout Utility Week’s Consumer Vulnerability Conference, organisations shared initiatives and strategies on how they have helped to create an inclusive and easy-to-access service. Notably, United Utilities shared with us its safe entry doorbell, created to reduce the risk of intruders, while other organisations spoke about their data-sharing practices and the challenges they’ve faced in addressing vulnerability.
It was evident that the need to work collaboratively and consistently is vital to truly protect consumers, and the best route to benchmark these practices within industry is through standardisation. As Lord Whitty observed, there’s currently no Kitemark for vulnerability. However there is the Inclusive Service Verification scheme, which I did a presentation on with Kerry Potter of UK Power Networks. This looks specifically at how to identify and respond to consumer vulnerability, as noted by several panellists throughout the day. A fundamental challenge in this industry is that those who are the most vulnerable are often the hardest to engage. Surely using a common framework to determine who and how to help will inevitably increase efficiency?
There’s still a long way to go, but the passion and commitment from the organisations attending the conference was clear, and the day itself was a true demonstration of collaboration across the industry – I look forward to next year’s event.