Open Data in the Energy Market
Make It Cheaper respond to John Penrose MP's proposed motion to promote open data in the energy market
John Penrose MP has proposed the following motion:
"…calling on the industry, regulators and the Government to consider solutions which recognise that many people lead busy lives where switching their energy supplier may not always be a high priority.”
Here's our response to, as well as some facts and figures around this motion.
Whilst we do not support Price Controls* per se, we are very much in support of any measures to promote ‘Open Data’ in the energy market. Arguably this is already being demonstrated by the efforts to broaden out ‘MiData’ – however, not only do the government’s proposals currently exclude commercial energy customers but are proceeding at a sluggish pace. A stop-gap proposal presented to the CMA and OFGEM by Make It Cheaper is to mandate digital ‘Letters of Authority’, allowing customer to delegate their authority to trusted third parties. This would have two immediate positive outcomes:
- More of the unengaged would readily engage in the market.
- The already-engaged are less likely to abandon the switching process at the first hurdle.
According to Make It Cheaper research:
93% Of SMEs want their energy supplier to provide the necessary information needed to get a competitive quote.
92% Of SMEs think a third party of their choice should be able to access this information too.
82% Of SMEs want a trusted third party to be able to take care of renewals on their behalf
60% ‘Letters of Authority’ signed by customers that suppliers actually respond to.
30% SME energy switches ‘Objected’ to by the losing supplier
Letters of Authority for SME customers: Make It Cheaper also has evidence of energy companies preventing their SME customers from switching by withholding the information they need. Our attempts to help customers find out on their behalf - via digital Letters of Authority (LoA) - are often thwarted by suppliers being slow and obstructive.
For example in the three weeks from 6th to 24th February, Make It Cheaper sent 352 LoAs to energy suppliers of behalf of customers. By 6th March:
- 202 had received a response (57%)
- 43 had been rejected (12%)
- 151 were still outstanding (43%)
Of particular concern is the high number of Change of Tenant (COT) requests which are left with no response. This is where a business moves into new premises and we send an LoA to the property’s incumbent supplier to log them as the new tenant to start the process of moving them from emergency rates and placing them on a competitive tariff.
In our study we found that 100 out of 135 (74%) LoAs for COT customers failed to receive a response. This shows that suppliers aren’t treating their customers fairly and that the delays caused by suppliers are frustrating competition in the marketplace and causing serious customer detriment.
Mandating suppliers to respond to LoAs in a set timeframe would be a simple way to ensure SME consumers can easily engage in the market.”
Simply asking for ‘Current Spend’ is enough to deter most people
In the 25th November 2016 issue of Utility Week, Tim Routledge, CEO of Experience Insight, wrote:
Consumers reach their peak level of stress during the initial research phase using comparison websites, and principally when they were asked how much they currently pay for energy.
…almost all participants abandon the process at this peak stress point.
Clearly, people do not like thinking about their energy expenditure – whether it is the actual amount, having to find energy bills, or just providing personal information. The stress it causes is enough to make consumers quit the process, regardless of the potential savings to be had.
So, if one of the main obstacles to switching occurs at the earliest stage of the process, some major changes must be made to the research process if customers are to be encouraged to switch energy supplier. The responsibility of the customer to provide details of their energy spend should be alleviated. This should be possible. After all, it works in other sectors: when switching bank accounts or some broadband suppliers, for example, all you need is your account information and the rest is done for you.
The industry needs to collaborate to remove this major obstacle if it is genuinely serious about encouraging competition
* We believe an indirect result of ‘Price Controls’ to be the removal of the cheapest prices for consumers that are actively engaged in the market. We also believe that, although well intended, this market intervention could actually cause further regulatory ‘drag’ in an industry that needs quick fixes.