Energy UK response to Ofgem: Call for input – Consumer Outcomes

Executive Summary

Energy UK welcomes the opportunity to provide input on the development of the Consumer Outcomes work and the potential to improve the way in which Ofgem will approach interventions in the retail market. 

Energy UK has set out in response to the DESNZ Review of Ofgem and a paper on the future of energy regulation, the potential for energy regulation to enable better outcomes for customers. The way in which Ofgem seeks to use regulatory tools to pursue outcomes for customers must show more significant self-reflection and better articulation of role, priorities and methods, linked to evidence of customer preferences. It must also clearly align to challenges drawn out by the DESNZ Review of Ofgem.   

Energy customers require a regulatory framework that encourages investment and innovation and supports a resilient energy market. This means supporting good outcomes for consumers by enabling meaningful competition rather than regulating for homogenised outcomes. From a growth perspective, the framework should support a diversity and tailoring of offerings and support. This is key for domestic energy services, but particularly in the non-domestic sector, to ensure that both energy supply activity and the industrial and commercial markets remain investable.  

This workstream will be positive where it reduces burden and lowers costs, enables tailored services, while maintaining targeted protections where they are needed. Use of principles will not in themselves achieve these benefits, particularly if they are also duplicated by prescriptive regulation. Being clear about where Ofgem wants to use principles, prescription and regulatory tools is key for this workstream. It will only enable suppliers to provide greater value to customers if it strips back unnecessary regulatory burden and provides greater investor confidence in Ofgem’s priorities and approach to intervention in the retail sector. 

24 is too many outcomes. Implementation would be complex and responsibilities unclear. A key step is determining how the intended outcomes will be delivered through a combination of existing obligations and intent for market design, regulation and service delivery. The proposed outcomes need further structuring to set out the role of Ofgem, suppliers, other industry parties and non-regulated actors in delivering these outcomes. Ofgem should clearly identify which outcomes suppliers are directly accountable for and where they are not so that they are transparent and manageable and avoid unnecessary regulatory burden.  

Better clarity on intended measures of success will be helpful, but it is vital to understand that consumer perceptions will not always reflect supplier-controlled outcomes. Customer satisfaction is likely to be linked to energy bills and media coverage of the sector and are to some extent beyond supplier control. Assessing supplier performance therefore needs to balance evidence of reliable enduring metrics of supplier activity that minimise adhoc and duplicative requests, with customer perception data. We support robust, high-quality data to direct and then focus on areas of failure. Interventions could then be tailored to address specific outcomes and evaluated regularly to confirm they are achieving the intended results. 

We think the framework must reflect on the significant differences across domestic and non-domestic markets to ensure it is effective and proportionate. It must also cover intermediaries to properly cover the full customer experience.  

This workstream has been developing for some time and we are keen to see progress in Ofgem’s understanding on Customer Outcomes reform. The conflicting approach inherent in ongoing activity such as via work on Guaranteed Standards of Performance (GSoPs) leads to a lack of supplier confidence in this work. There still seems to be a lack of clarity about what Ofgem wants to achieve through this workstream and we think further iterative engagement with suppliers is needed. 

If you would like to discuss the above or any other related matters, contact us directly at rosie.nurse@energy-uk.org.uk and candice.orr@energy-uk.org.uk.