The challenge of trust in utilities

Research by Utility Week suggests price is not the crux of low trust in utilities, the challenge is more complex.

Consumer trust and confidence in their utilities providers is far from straight forward.

National headlines would have you believe that high prices and profiteering are the crux of the undeniably low public esteem in which utilities are generally held. But in reality, the issue is considerably more nuanced, involving issues around transparency, loyalty, social equity and fair play.

In short, there is no single silver bullet to the challenge of creating engaged utility customers with high levels of confidence in the industry. This truth was made clear in a recent study, conducted by Utility Week in conjunction with consumer research firm Harris Interactive.

The survey asked respondents a range of questions to gauge their awareness of different types of utilities, the transparency of the market and their view of the value for money they receive for utility services. The research also probed opinion on policy commitments to intervene in the utilities industry, and on the trustworthiness of utilities companies.

In terms of market understanding, the survey showed that consumers are relatively confident they can identify who supplies their various utility services, including their energy networks with around half of respondents saying they could definitely name their local gas and power distributors.

Knowledge of water suppliers seemed most robust, with over 85 per cent of respondents saying they can definitely identify their clean water provider.

In terms of value for money, despite the heightened political environment around the cost of utilities, consumers were broadly positive about the amount they pay for the services they receive.

For energy, 34 per cent of respondents said they are happy that they pay a fair price. A further 39 per cent said they do not believe prices are unfair, but in ideally would like to pay less.

This compares with a fifth of respondents said they believe energy costs are unfair, while 7 per cent were unsure. A similar segmentation of opinion was seen in relation to water billing.

Utilities leaders might take comfort from these results, which indicate a much higher level of satisfaction with utilities costs among consumers than political rhetoric and national press reports suggest.

Source: Utility Week and Harris Interactive

Complacency would be unwise however. Notwithstanding their an apparent willingness to pay, survey respondents were also pro-market intervention.

Over half, 51 per cent of respondent advocated the idea of an energy price cap for the whole market. Just 23 per cent said that a partial market cap, applied only to those who struggle to pay their bills, would be sufficient. In addition, 42 per cent of respondents said the agreed that utilities should be renationalised.

Industry commentators viewing the survey findings, say this dichotomy between perceived value for money and a desire for market intervention reflects the complexity of the public trust challenge for utilities.

Source: Utility Week and Harris Interactive

Harris Interactive’s energy expert Mark Brenton suggests the eagerness for an energy price cap reflects fears about costs rising in the future – fears given strong foundation in the context of price hikes from many major suppliers this year, most recently British Gas’s 12.5 per cent increase in the cost of electricity for customers on its standard tariff.

Eon’s director of strategy and corporate affairs Sara Vaughan offers a different interpretation. “It’s plain from this research that the vast majority of people don’t feel they are being unfairly charged for their energy – but they do want a clearer picture of what makes up their energy bill,” she says – 77 per cent of respondents to Utility Week’s survey said their bills ought to give greater visibility of the costs which contribute towards it.

Vaughan believes the findings offer new impetus for suppliers to “work harder” to explain the impact of government policy, infrastructure and technological improvements being undertaken by energy suppliers, as well as the move to a greener energy system. “These all need to be set out so customers have a clearer picture of what they are funding,” she says.

Rob Doepel, an energy partner at EY, agrees the research indicates there is “an opportunity for suppliers to get on the front foot with pricing”. He remains concerned however at the residual levels of distrust in utilities that lie behind consumer support for market intervention.

When respondents were asked why they approved of the idea of renationalising UK utilities, many pointed, unsurprisingly, to perceived profiteering and fat cat cultures. Other common answers however revealed uneasiness about foreign ownership of utilities or simply a belief that a nationalised industry would provide an easier to understand system with greater standardisation of offerings – and therefore greater equity for all customers. Fundamentally, many simply said that essential services such as energy and water should be supplied by not-for-profit organisations.

With companies such as Welsh Water and council-owned Bristol Energy already proving that such an arrangement can be sustainable for utilities companies, no doubt the collective gut instinct for essential services untatinted by the commercial drive for profit will remain at the core of the public trust challenge for utilities. No doubt too, it will continue to fire debate about the future structure and regulation of the market.

Source: Utility Week and Harris Interactive

Utility Week’s consumer research, conducted in partnership with Harris Interactive, surveyed over 1,000 adults across the UK.

Industry comment

Responses to Utility Week’s research:

Peter Haigh, chief executive, Bristol Energy 

“Ofgem’s current proposal is to limit a price cap to vulnerable customers in the Warm Home Discount core group. But this is just a minority of the customers who are being overcharged –  there are millions overpaying several hundred pounds a year.”

Rob Doepel, energy partner, EY

“There is a current window for the sector to get back on the front foot with regards to pricing, but the warning is clear, if the sector doesn’t get on with it themselves, it will soon be reacting to an external intervention – time is running out.”

Sara Vaughan, strategy and corporate affairs director, Eon

“It’s plain from this research that the vast majority of people don’t feel they are being unfairly charged for their energy – but they do want a clearer picture of what makes up their energy bill, where that money goes and what are the benefits to them as consumers.”

Mark Brenton, energy expert, Harris Interactive

“Three quarters believe that they are not charged an unfair amount for their energy but over 50 per cent feel that there should be a price cap on energy for everyone. This suggests that, despite being happy with what they are paying currently, there are underlying fears amongst many consumers on what they might be paying in the future.”