The Ofgem-branded “best offers” letter being trialled as a means for re-engaging energy customers stuck on standard variable tariffs (SVT) will struggle to make an impact with vulnerable customer groups, industry figures have warned.
The energy regulator is trialling the best offers letter in one of two approaches to the implementation of the Competition and Markets Authority’s (CMA’s) “sticky customers” database remedy. This seeks to motivate disengaged customers who have been on SVTs for a long time to move onto cheaper deals.
Ofgem told Utility Week that the first phase of the database trials, which are ongoing, will not include “complex” customer groups, such as financially vulnerable customers, those with disabilities, or those for whom English is not a first language.
Gillian Cooper, head of retail energy markets at Citizens Advice, said she supported this approach as a starting point, but cautioned that Ofgem should not make assumptions about the way in which vulnerable customer groups will react to its letters based on results with non-vulnerable customer groups.
She added: “Both Ofgem and suppliers may find it challenging to design trials that work effectively for vulnerable customers, as many customers may not have heard of Ofgem or will be suspicious of receiving mail from an energy firm they’re not familiar with.”
Cooper also observed that past attempts to engage with difficult to reach households via letter campaigns have achieved “limited success”.
She doubted that the CMA-imposed database remedy will deliver “the type of change we are looking for in the market”.
“The issue is not just about how many customers are on a SVT,” she said. “It’s about who is on them.
“If we get down to 30 to 40 per cent of the market being on SVTs, that is still not OK if all of those customers are the most vulnerable households.”
Peter Haigh, managing director of municipal energy supplier Bristol Energy, agreed.
He told Utility Week that he welcomed any effort which encouraged greater switching and engagement in the energy market, but commented: “I have to say that Ofgem writing to them and making more junk mail – for want of a better phrase – doesn’t fill me with confidence.”
Haigh said that “by far the minority” of customers will recognise or relate to the Ofgem brand and added that early trials for the CMA database remedy, which exclude complex customer groups, are unlikely to give much insight into the “varied reasons” for disengagement.
He urged Ofgem to use its trials as an opportunity to “really talk” to customers and understand their reasons for disengagement.
The managing director of Bristol Energy – which is owned by Bristol City Council – also said he is “curious that we’re choosing not to work with other agencies on this”.
Haigh believes that working with city councils, or other agencies including charities, to deliver information about cheaper energy deals might deliver better results, “because that would at least be an entity that customers can relate to”.