In an ideal world there would be no need for the Energy Ombudsman, Matthew Vickers concedes. As the incoming Energy Ombudsman, he is determined to see customer complaints sorted out long before they escalate to the stage where they reach his desk. As far as Vickers is concerned, the customer really is king, and energy retailers would do well to realise it.
Vickers’ new role will be as the chief executive and chief ombudsman designate at Ombudsman Services. As such he presides over a not-for-profit organisation with around 600 employees in total, which provides – as the name suggests – ombudsman services for a range of industries including communications and home improvement.
The energy arm resolves the highest number of complaints of any scheme the company runs and, in some ways, has the hardest job. The Energy Ombudsman scheme is statutory, which means that it is approved by energy regulator Ofgem to independently handle disputes between energy companies and their customers. This includes domestic customers and micro-businesses. Any company in the energy sector can apply to be a member and, if they join, must abide by its rules.
Ombudsman Services is funded by the companies it handles complaints for, made up from an annual subscription and a case fee for each complaint it accepts. The amount depends on the type of business and in which month of the financial year it joins the scheme. The Energy Ombudsman itself doesn’t have the power to fine companies, but it can insist that a company reimburses a customer up to £10,000. However, the most common award is much less – about £50.
The chief executive job suits jaunty Vickers, who has spent a lifetime dealing with the public in various guises, beginning his career on a graduate scheme at supermarket chain Safeway, now owned by Morrisons. In between he’s had a spell with the Foreign and Commonwealth Office as the British Consul, initially in the Canary Islands and subsequently in Madrid. Then there’s his role as chief executive of the Scottish Legal Complaints Commission from 2012 to 2015, where he has just moved from.
“I have always worked in customer service and commercial environments in one form or another,” he says, sitting down with Utility Week in a smart modern office block in Daresbury, Cheshire. “Retail is where I come from, and this is very interesting when you look at where energy is. Retail is all about understanding your customers inside out.” In his Consul job Vickers, who is fluent in Spanish, frequently dealt with life and death situations involving very vulnerable people among the three million or so tourists visiting the Canary Islands each year. “We’d deal with things like balcony falls and swimming pool drownings. Real tragedies in the truest sense of the word, and you are dealing with that with a very small team and you are dealing with that in a foreign language.”
Dealing with consumer complaints about energy providers might not be so dramatic, but to the circa 50,000 people who bring complaints to his organisation every year, his role is equally important. In recent years complaints have increased, as new players have come into the market. Despite the overall number of complaints to Ombusdsman Services falling, those about the energy sector have increased – overtaking the telecoms sector for the first time. Ofgem was recently forced to open compliance cases into three companies – First Utility, Ovo Energy and Utilita – for their “poor handling” of customer complaints.
This rise means the ombudsman has had its work cut out. However, Vickers’ mission is to stop the ombudsman having to be used at all. “The value of the ombudsman for companies and for consumers is if we can help them get on the front foot and stop the bad stuff from happening in the first place. We shouldn’t be designing customer journeys based on the ombudsman being in them. The fact that people have to come to the ombudsman, that’s not a customer journey that anyone would want – me included.”
Vickers firmly believes the UK energy sector must adopt a more consumer-friendly approach with customers. “It’s a real opportunity for businesses to make money. Particularly in the energy sector – what are you going to compete on? You can try and compete on price and you race to the bottom around price and that’s all the challenges that the companies have got now, price competition is getting tougher all the time.
“The answer in the retail environment is you have to understand your customers better. The better, richer, more detailed picture you can build of your customers and the more focus you can put on them at the centre, the more you win. It doesn’t matter what sector you are in: winning businesses win with customers – it’s as simple as that.”
Vickers says a major source of complaints received in relation to energy is the billing process. Following the demise of small supplier Iresa, Vickers wrote a piece for Utility Week highlighting the dangers of the mishandling of complaints. In it he suggested that, had the supplier had in place a larger, more efficient complaints-handling process, it would have been able to nip a large proportion of cases in the bud early on.
In a nod to his retail past, he quotes the English title of the celebrated work on corporate leadership – Moments of Truth – by Swedish businessman Jan Carlzon. “It all comes down to that moment of truth. You can say what you want, you can promise people what you want, but the moment of truth is that bit where they buy something or they use something. Where does that sit in for energy customers? Funnily enough, the complaints we see are on those moments of truth. It happens when you bill and it happens when you switch.”
Vickers’ message is one of more dialogue. “I guess where that’s particularly challenging, but equally where a big opportunity is for companies, is that there aren’t that many places where energy companies get an opportunity to be in a dialogue with consumers. They really have to make the most out of the ones that they have, and the ones that they have are when you start with a new company and when you get billed.
“Outside that, particularly as we move into smart meters, there’s fewer and fewer opportunities for businesses to build and make the most of that dialogue, of that relationship with consumers. Usually, in a world of fast-moving consumer goods or retail you’re all about building that relationship with a customer.”
Vickers believes the introduction of smart meters will help reduce the number of billing complaints. “Given that the majority of complaints we get are about billing, yes there is a real opportunity here that smart meters could help a lot with that.”
The rollout has encountered many problems with delays, interoperability issues, a lack of take-up, and spiralling costs, leading to criticism and condemnation from many within the sector and government. In June, Antoinette Sandbach, chair of the Business, Energy and Industrial Strategy (BEIS) Select Committee, said she did not think the country would hit the 2020 target. “I think there needs to be a good look at why,” she said. Labour shadow minister for energy and climate change, Alan Whitehead, was equally sharp-tongued. He drew attention to the low rate of SMETS2 installations, noting that the cumulative total had only risen from 250 in November to 1,000 in June. Meanwhile, according to the latest figures from Ofgem, a total of 12 million SMETS1 devices have been installed since the rollout began.
Needless to say, this is a hot topic for the energy sector right now. What are Vickers’ thoughts on how the rollout is going? “It’s a complicated business isn’t it? We are taking effectively an analogue system and with smart energy you can see the opportunities there are with smart meters and how that rolls out. But how can we help that transition be as seamless as possible?”
However, he is sanguine about the opportunities presented by smart meters. “Where you’ve got the problems at the moment with interoperability, it’s difficult to see where that will end up landing. There are some real opportunities coming out of the smart meter rollout for us to end up with better services for customers.”
He adds: “It’s hard for us to say just about where we are now because we’re still mid-flight with the rolling out. There are some signs that if you can get the right smart meter in place then yes, it should make that whole billing experience much more accurate and much better.”
With more than 70 suppliers in the energy market, consumers have never had so much choice, but a spate of disruptor energy brands going bust has caused concern for many industry commentators. Does Vickers believe small suppliers take on too many customers too soon? “Absolutely, sometimes,” Vickers replies. “Back to that point about when you are going to get the complaint, you’ll get it on the billing cycle. So you can win lots of people one quarter and everything is fine because you haven’t billed them yet and then you bill them, or don’t bill them.”
However, Vickers warns against putting all small suppliers into one category. “Yes, there are some risks coming out of small suppliers; equally there are some big opportunities – and it’s important that we recognise that. It doesn’t mean small suppliers are bad news, it doesn’t mean small suppliers are good news. It’s like anything in life, it’s nuanced. Seeing more competition in the market is great, but competition isn’t always the answer.”