Duncan Wilson
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Allowing British electricity consumers to choose their supplier has been a costly waste of time and money.
I read with interest the many good articles about customer empowerment in the July/August issue of IEEE Power & Energy Magazine.
Particularly for the case of domestic customers and small businesses since the year 2000, I agree with Steve Thomas’ conclusion that “allowing consumer choice in the U.K. electricity sector has been a costly waste of time and money” (“Allowing British Electricity Consumers to Choose their Supplier”).
The graph in Figure 1 shows the increases (in real terms) of U.K. domestic electricity prices for the period 2002 to 2022. While there has been a dramatic rise in prices since 2021 due to the war in Ukraine combined with the United Kingdom’s growing dependence upon imported natural gas for power generation, domestic electricity prices have been increasing for the past 20 years.
Steve Thomas highlighted a number of the failures by the regulator, Ofgem. The July 2022 “Energy Pricing and the Future of the Energy Market” report by the House of Commons Business, Energy and Industrial Strategy Committee concluded that “Ofgem has proved incompetent as the regulatory authority of the energy retail market over the last decade”[1].
“Between July 2021 and 2022 May, 29 energy suppliers in Great Britain collapsed. Since July 2021, through the Supplier of Last Resort process, 2.4 million customers were moved from 28 failed energy companies to new suppliers. This is expected to add £2.7 billion (£96 per customer) to energy bills.
The Special Administration Regime was used for the first time following the collapse of Great Britain’s seventh largest energy supplier, Bulb Energy, in November 2021. The Government’s continued support of Bulb is expected to cost at least £2 billion”[1].
The U.K. government and Ofgem both believed that increased supplier competition would drive down prices to customers. However, in the process of encouraging new suppliers to enter the market, “the regulator enabled poorly capitalized suppliers to be overly reliant on customer credit balances and operate with inadequate hedging, leaving the market ill-equipped to absorb wholesale price increases. The government prioritized competition over effective market regulation and overlooked Ofgem’s lack of supervision of this essential market.”
“The impact of the energy price crisis on households is ongoing and severe, particularly in the context of the cost-of-living crisis and is likely to cause an unacceptable rise in fuel poverty and hardship this winter”[1].
In 2023 February, Ofgem published supplier ratings based upon market-wide assessments of energy suppliers’ performance. The review found: 1) weak policies and pathways for customer service journey, including incomplete communications to customers in relation to complaints; 2) inconsistent scripts for staff handling complex calls; 3) customers left waiting for hours on the phone on several occasions; 4) phone calls simply not picked up and slow responses on written customer contacts; 5) up to 50% of customers giving up and hanging up calls as not answered; 6) high rates of customer complaints upheld by the Energy Ombudsman; 7) incomplete management information being used to monitor performance; and 8) weaknesses in customer service agents’ training and/or quality control mechanisms [2].
Ofgem also launched a separate investigation into practices at British Gas associated with its treatment of vulnerable customers following media allegations that British Gas had been habitually sending debt collectors to break into the homes of vulnerable customers who had fallen behind on energy bill repayments and forcing the installation of prepayment meters on such customers.
Electricity customers are surely best served by reliable and secure supplies delivered at affordable prices with acceptable levels of customer service. I would suggest that a pragmatic and evidence-based approach is required by energy regulators to ensure such an outcome.
—Duncan Wilson
[1] “Energy pricing and the future of the energy market.” UK Parliament. Accessed: Jul. 28, 2023. [Online] . Available: https://committees.parliament.uk/work/1698/energy-pricing-and-the-future-of-the-energy-market/publications/
[2] “Ofgem review reveals that customer service standards of energy suppliers must improve.” Ofgem. Accessed: Jul. 28, 2023. [Online] . Available: https://www.ofgem.gov.uk/publications/ofgem-review-reveals-customer-service-standards-energy-suppliers-must-improve
Digital Object Identifier 10.1109/MPE.2023.3308241
Date of current version: 19 October 2023
1540-7977/23©2023IEEE