Ofgem is consulting on a package of proposals designed to offer “a simpler, clearer and fairer retail energy market that works in the interests of all consumers”. “Simpler” comes in the form of banning confusing multi-tier tariffs and placing a cap on the number of tariffs suppliers can offer. “Fairer” involves introducing new standards, backed by the power to levy fines to make sure suppliers treat their customers fairly. “Clearer”- well, that presents arguably the biggest challenge to suppliers.
The regulator is set to rigidly enforce standards for clearer information on bills, annual statements, and price notification letters.
These regular communications sent to energy consumers – and the way they are personalised – will be critical in enabling suppliers to meet the standards demanded by Ofgem and consumers alike. Specifically, suppliers will be expected to:
· give consumers greater personalised clarity across all tariffs (no more than four core tariffs for each fuel);
· ensure all tariffs are expressed as a standing charge and single unit price;
· present dual fuel discounts separately (expressed in pounds and pence rather than as a percentage).
Providers will be expected to use a new tariff comparison rate in their communications to help customers compare tariffs. Ofgem is also proposing personalised estimates with customers’ usage to help them compare tariffs more accurately when switching.
Some suppliers have already redesigned bills to make them easier understand, but Ofgem wants to go a step further and is proposing a pilot scheme in which suppliers offer their vulnerable customers – and others who have not switched for some time – a personalised estimate on the cheapest tariff from across the energy market. It is proposing working with suppliers and consumer groups to run the scheme to see if this can be made to work.
For mass communications such as energy bills and statements, these are big challenges, so providers must have the processes and technologies in place, not only for print communications, but also for email, web and text messaging. These are increasingly becoming the media of choice both for suppliers and their customers.
In other words, they need a multi-channel communications strategy, with the right technology to underpin it. This will need careful planning, particularly for IT departments, which will need to re-script the multitude of versions of current applications. Such projects typically take many months and can be a significant financial challenge.
On a more positive note, there is a real opportunity for suppliers to get ahead of the curve and be proactive before Ofgem-driven regulation kicks in. There is no doubt that the new standards will require all the information that suppliers send to consumers to be simplified and personalised. That is a given. But communications will also need to be more engaging if suppliers are to maintain and grow their businesses in what will become an increasingly tough and competitive environment.
There’s not a lot of time. While it is legally required to go through the consultation process, Ofgem aims to introduce its reforms by summer 2013.
Giles Hill is general manager, Sefas UK
This article first appeared in Utility Week’s print edition of 23rd November 2012.
Get Utility Week’s expert news and comment – unique and indispensible – direct to your desk. Sign up for a trial subscription here: http://bit.ly/zzxQxx