Ofwat has come under pressure to flesh out its plans for an independent ombudsman from MPs, who have also urged Ofgem to provide an update on its plans to fund the decarbonisation of the energy system.
In a report, published today (12 July), the highly-influential House of Commons’ public accounts committee (PAC), examines the work of the four main consumer protection watchdogs – the Financial Service Authority, Ofcom, Ofgem, and Ofwat.
The report concludes that consumers are being “penalised” for loyalty, citing an estimate by Citizen’s Advice that households who do not switch their energy, telecoms and financial services providers could be overpaying by up to £1,000 a year.
The report identifies the regulators’ traditional reliance on promoting competition as a “huge part of the problem”.
“Regulators have traditionally worked on the basis that competition will lead to the best outcomes for people,” the report states.
“Regulators need to work better together to ensure that competition leads to better services and more choice for consumers, rather than presenting opportunities for them to be exploited by suppliers.”
As part of a broader effort to address legal and policy barriers, the report recommends that Ofwat should update the committee by the end of this year on the work it has done into introducing an independent ombudsman in the water sector.
It says Ofgem should supply an update by the same deadline on how they will approach the question of how to fund decarbonisation.
Its chairman Martin Cave recently told the Utility Week Summit that the energy regulator is embarking on a top down review of how it approaches environmental sustainability issues.
And all regulators should provide an update on work done to identify what legislative changes would be appropriate to enable better data sharing, which could help efforts to identify vulnerable consumers.
The report also criticises bills and other information issued by companies as “often unnecessarily complicated”, complicating the ability of consumers to choose deals, know what support is available or avoid being mis-sold inappropriate products.
And the committee says it is “surprised and concerned” by the regulators’ acknowledgement that much of their reporting could be more accessible for the public, describing the information on their websites as “muddied by jargon in place of plain English” with complex layouts that are difficult to navigate.
The report calls on each regulator to take steps to enhance the “clarity and transparency” of publicly available information and the usability of their websites, reporting back on progress by the end of this year.
The MPs also criticise “inconsistent” approaches by individual consumer regulators, which make it ‘more confusing’ for consumers and means the watchdogs are not sharing best practice as much as they could.
The report says that regulators could not furnish the PAC with any examples of “meaningful joint working” that they had achieved.
The report concludes that the four regulators should work together to develop “consistent approaches” to common problems for consumers across the sectors that they police, extending to joint strategies where appropriate.
It recommends that each of the regulators should write to the PAC by the end of 2019 explaining the specific joint projects they expect to complete and how they will measure the impact of their work on consumers’ lives.
And the committee says it is “disappointed” that regulators do not typically set targets on achieving high level outcomes, like affordability and value for money, and question how the regulators intend to monitor progress.
“More specific, measurable, and understandable” aims for consumer outcomes in their sector should be set out by each regulator by the end of 2019.
It also says that regulators must work “closely” with government on social policy objectives and priorities in order to help manage potential conflicts or trade-offs between objectives or groups of consumers when making regulatory decisions.
PAC chair Meg Hillier, said: “Consumers – disproportionately vulnerable ones – can face serious problems in accessing essential services such as water, energy, communications and finance.
“Issues including debt problems, struggling to access the best deals, and seemingly impenetrable bills can significantly impact people’s daily lives.
“The primary role of regulators is to protect consumers from such issues. The main regulators of these sectors, however, too often take inconsistent approaches. They need to be clearer about what they are trying to achieve for consumers and the common solutions they can bring.
“Regulators must work closer together with the best interest of consumers at their heart. They must ensure that competition leads to more choice, better services and prevent consumers from being exploited by suppliers.”