CMA: Energy sector needs more customer churn

19th Feb 2015

The Competition and Markets Authority (CMA), which has been reviewing the UK’s big six energy firms since last summer, has released its latest update into the investigation.

The detailed report highlights a number of flaws in the service and provision of SSE, Scottish Power, Centrica, RWE Npower, E.On and EDF Energy, notably around a lack of customer churn in the sector.

The findings state that more than 95% of dual-fuel customers of the big firms would have saved money by switching tariffs or suppliers.

It also reveals that complaints recorded against the big six firms rose fivefold between 2007 to 2013, with many consumer concerns focusing around customer service and billing.

The investigation was launched last July in response to an earlier referral from the energy regulator Ofgem, which was concerned by the lack of competition in the UK energy sector.

"We note that increasing numbers of complaints may reflect: declining quality of service; price rises; changes in reporting standards; increasing media scrutiny of the sector; or a combination of these factors," the report states.

Sticky customers

The report also refers to what it calls ‘sticky’ customers, and suggests that much of the dominance in the sector has arisen from a lack of supplier switching among consumers, with between 40% and 50% of customers having been with a supplier for more than 10 years.  

The CMA calls the band of ‘sticky’ customers, "less educated, less well-off, more likely to describe themselves as struggling financially, less likely to own their own home, less likely to have internet access, more likely to be disabled or a single parent" and that they are "more likely... to think switching is a hassle, that there are no real differences between suppliers and that something may go wrong if they switch".

In January, Energy UK reported that energy companies had made it possible for consumers to change provider in 17 days, down from five weeks. However, many industry experts state the process must be made even easier, if the sector is truly to become more competitive and improve customer satisfaction levels.

Datamonitor’s Tom Haddon believes the energy sector switching process should be made “as time efficient as in the telecoms and banking sectors (where providers can be changed in a matter of hours or at most a couple of days)”.

Richard Lloyd, executive director of Which?, published his response to the CMA findings, and called the report a ‘watershed moment’ for the energy market.

“The Competition and Markets Authority now needs to develop a set of solutions to repair the market and make it work for everyone, not just the suppliers,” he added.

“This must include establishing a fair price that people can trust, to restore consumer confidence in the energy system. Consumers will also be looking to politicians of every party to set out how they’ll deliver fair and affordable energy prices in the future.”

Consumer trust was revealed to be at an all-time low, with a recent poll by YouGov and SQS suggesting a large portion of the population believe the energy market is in need of a major shake-up, with many stating they felt other, customer-centric brands such as retailers would make for better suppliers and improve the current customer service levels in the sector.   

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