OFGEM, the energy industry regulator, has conducted a review of how energy company complaints to understand customer satisfaction levels. The review has shown that many customers are frustrated with the poor responses from their energy suppliers. Many customers complain over the phone with some in writing, where a minority of people get their complaint dealt with at the point of the complaint. Customers felt they did not get an adequate response from their supplier as customers did not receive a promised call-back at the allotted time. This has led to customer frustrations and yet another annoyance towards energy companies.

The review by OFGEM centred on complaints made at the end of 2011, where it showed that despite the frustrations felt by customers, the actual percentage of customers who were satisfied with the way the complaints were handled had increased. Around 15% increase in complaint satisfaction levels (25% to 40%) based against the previous year. The big six energy suppliers were ranked in terms of customer satisfaction levels with SSE and Scottish Power the best performing energy suppliers with EDF ranked the lowest. OFGEM has been vocal that energy companies should be doing more to address customer dissatisfaction despite the improvements in the review. That energy suppliers should be doing all they can to acknowledge and address customer issues. This is an important warning to the energy companies as some of them have received heavy fines in the past for not dealing with customer issues and complaints is the correct manner.

The major energy suppliers have been quick to point out that they have invested in their service levels and will continue to strive for greater customer satisfaction and service levels. This is an interesting point as the gas and electricity that flows through the pipes and wires into customers’ homes is the same whichever supplier a customer is with. Customers do not have pipes and sockets for each supplier to use depending on the best deal or experience. Therefore, energy supplied to customers is only differentiated by two elements, price and service. In a highly competitive energy market, price will be different between the suppliers as each supplier has several tariffs and deals that are on offer to consumers. Multiply this number by each supplier and you have a wide range of deals for consumers, with some being better for customers than others, depending on individual circumstances. In addition, price changes in the industry usually follow a trend. If one supplier increases prices the others usually follow and also when the prices are decreased. This keeps price relatively equal in the market with some variances found through tariff deals. This makes it important for customers to shop around as they can make savings on their bills each year. The other differentiator is service.  Energy suppliers can provide a wide variety of service levels depending on the company. Customers will have varying experiences with each supplier depending on their interaction and issue. Many customers do not want to speak to their energy suppliers unless there is an issue. Therefore, the experience is usually a tense one and if the supplier gets this experience wrong, it can influence the opinion of the customer towards their energy company negatively, despite years of non issues. In addition, customer will want to interact with their energy supplier in a variety of ways. These include telephone, letter, sms and e-mail. The technology and responses of these channels will also help to form the opinion of the customer towards their supplier. 

It is highly important that customers are treated well and their issues taken seriously by energy companies. If not, then those energy  companies will find that their resources are tied up managing complaints and that many of their loyal customers have  decided to give another energy company a chance to supply their energy.

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British Gas, one of the major energy suppliers, has launched a scheme to help vulnerable customers and those who need it most free insulation.

The share the warmth scheme gives £50 to anyone who recommends a friend or anyone else they know for free insulation. Those who are recommended must meet certain criteria as the scheme is designed to provide support for those who need it most and those who are certain types of benefits. The scheme is open to anyone and those recommended do not even need to be a British Gas customer. In addition to the £50 payment given to the person who recommends someone else, the person in receipt of the insulation also receives £50. The payments are made following a successful installation of the insulation. This is a fantastic offer from one ofBritain’s major energy suppliers. Consumers should be falling over themselves to take advantage of this offer, especially as there is no limit to the number of people that can be recommended for the scheme.

One of the main benefits of the scheme is to help those customers in the greatest need reduce the costs of their energy bills. This is achieved by the insulation products installed in the home. A large amount of heat loss is through the walls and roof of a home that can be as much as 50% of all heat loss. Insulating the home reduce this loss so that it costs the consumer less to maintain a warm temperature in the home. Another advantage of the scheme is to reward customer with money for recommending someone for the scheme. Not only does it help people save money it also generates money for those trying to help others. The carbon impact on the environment is also reduced as people consume less energy to heat their home. Energy produced from fossil fuels such as coal and gas release carbon into the atmosphere. Reducing the demand for this energy through the scheme will help to reduce the amount of carbon produced and released.

To qualify for the scheme the recommend person must be on the following benefits:

• State pension
• Child tax credit with an income below £16, 190

 Alternatively, the recommended person could qualify by being on one of these benefits:

• Income based job seekers allowance
• Income support
• Income related employment support allowance credit

Plus one of these benefits:

• Child tax credit including disability or severe disability
• A disabled child premium
• Parental responsibility for a child aged under 5 years who lives at the address permanently
• A disability premium, enhanced disability premium or severe disability premium
• A pensioner premium, higher pension premium or enhanced pensioner premium

To recommend someone you know or for more details please contact British Gas Share the Warmth phone line on 0800 084 3863

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In response to the Hills Fuel Poverty Review, British Gas has stated that it remains resolute in its fight to ensure that British households are not in fuel poverty. Professor John Hills, a professor are the London School of Economics (LSE), was commissioned by the Department of Energy and Climate Change (DECC) to review the fuel poverty issue. The report suggests that the number of households who are in fuel poverty is set to rise by 2016. The report says that the current 7.8m people who are in fuel poverty is set to rise to 8.5m by 2016.

Fuel poverty is where 10% or more of a household’s income is spent on energy bills (gas and electricity) to power and heat the home. Many people are struggling to meet ever increasing energy bill costs in these tough economic times, especially as many people are finding themselves out of work, pay freezes and the cost of living increasing. Households are making some tough financial decisions are often one thing will be sacrificed for another.

Ed Davey, the Secretary of State of DECC, has said the government is behind the reports recommendations of tackling the fuel poverty issue in the right way by channelling resources so that they are as effective as possible.

Ian Peters, Managing Director of Energy at British Gas, is also supportive of the Hills review. He said the report is thoughtful and tackles the issue in the right way especially as the report conclusions are to target those homes with the lowest incomes and those who have the most in-efficient homes. That this approach will help to reduce the fuel poverty gap. Mr Peters also mentioned that British Gas will remain committed to eradicating fuel poverty and recognises that energy suppliers have a responsibility to their customers and do all they can to help. British Gas installed around 410,000 insulation measures in customers’ homes in 2011, of which, many were free to customers. This volume of installations in double the figure in 2010 that demonstrated British Gas’ commitment to helping it’s customers and tackling fuel poverty. The company also provided more than £500m to vulnerable customer over the past three years with additional support provided via the British Gas Energy Trust where £10m was granted to those who were struggling to pay their bills.

Fuel poverty remains an issue for many households and the Hills report adds further worry for those who are borderline. As the economic situation continues more and more pressure will be felt by British homes as people make difficult decisions as they try to balance their budgets in order to meet all of their financial commitments. Unfortunately, some things will have to go so that homes can function. Energy bills are seen as important by as people become more disheartened at their situation some will go out to drink and eat less and choose to stay at home to save money. This explains that when surveys are conducted to assess how people prioritise their financial commitments satellite TV remains one of the things that people will not sacrifice as they stay at home more and more.

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He stated that the government was committed to a ‘bold transformation’ plan for the energy sector to ensure that British homes and businesses have enough power to meet their demand. Without a new plan the security of energy supply to Britain would be at risk that could impact energy prices and bills. There are also tough carbon reduction targets that Britain has signed up to and a bold, new plan is required to deliver that.

The Prime Minister also recognised that Britain has an out-of-date and inefficient grid network. This would require significant investment to bring this into the 21^st century. The grid is something that falls under the future plans of the government and of energy suppliers. With the advent of Smart meters and micro generation, such as solar panels, wind turbines and air/ground source heat pumps, the Smart grid will soon be a reality. The Smart grid is where energy flows two ways, both from power generation sources such a gas fired power stations and also from consumers’ homes through micro generation sources of energy. The Smart meter will be able to record the energy consumption and flow to ensure that companies can bill accurately and that consumers can earn money from supplying power to the grid. This differs from the traditional grid where the energy flow is only one way, from the power stations to customers’ homes. The major problem with this method is that energy is constantly produced and if people are not using it, it goes to waste and is both inefficient and costly. The Smart grid will help manage this demand far more effectively and reduce the levels of energy produced by power stations. This will reduce costs of production, and hopefully bills, as well as reduce the carbon impact on the environment.

The Prime Minister also stated that he was ‘convinced’ that Britain will need to have nuclear power within the new energy plan. This will help provide the much needed security of energy and reduce the carbon impacts of energy production. He said there were three main challenges:

1. Getting the prices right without government subsidies
2. Ensuring the new power plants are built on time as the old plants are decommissioned
3. Delivering economic benefits

He realises that to deliver this bold new plan the government must work collaboratively with the energy suppliers to secure that investment required for the capital projects as well as the technical experience and infrastructure. Without this collaborative approach the tax payer would have a large bill to pay. It’s true energy companies are also funded by their customers who are the very same tax payers who would fund a government initiative, however, using a combined approach would help reduce the direct impact on taxes and also take advantage of the highly competitive energy sector as suppliers will look for ways to be price competitive despite putting investment into projects. This should to mitigate some of the energy bill price impacts.

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It is generally understood that competition is good for consumers as it forces companies to compete and drive competitive advantages over each other to gain sales and loyalty from their customers. In the energy industry competition usually results in better customer service and/or tariff rate deals. This however is not strictly true.

The Japanese disaster in 2011 shook the world. The Fukushima nuclear power plant run by the Tokyo Electric Power Company (TEPCO) was subjected to a huge tsunami that was the result of an earthquake that caused a radiation leak. This disaster was a terrible incident that still has significant implications today. One of the continuing impacts from this disaster is that Japan has increased its production of electricity derived from burning gas as it took its nuclear power plants offline in the wake of the disaster. This has resulted in many of the large cargos ships containing Liquefied Natural Gas (LNG) being diverted away from their intended destinations in favour ofJapanas they would receive better prices for their LNG. The end result of this was that global energy companies, including those inBritain, had to pay higher prices for the LNG to ensure that gas supplies were secured with gas being delivered to their respective countries. The major energy companies withinBritainpaid higher prices that increased their energy costs. The companies have two choices in this situation; absorb the higher costs and impact their profit margins or pass the costs onto their customers in the form of higher prices.

Energy companies are likely to pass on the costs to consumers as they operate are low margin levels some as little as 5%. If these costs are not passed on to consumers, energy companies could find themselves making a profit loss putting jobs at risk and not being able to invest in the future of the British energy industry, especially in the green sector. Many of the new green projects being implemented inBritainare funded from the major energy suppliers, not the government. These projects include building of wind farms, insulation, new nuclear plants (green project due to the low carbon impact) and the smart grid.

Consumers who ultimately produce the revenue for the energy companies and the subsequent investment in these projects are hoping these initiatives will help reduceBritain’s exposure to volatile markets and the price fluctuations driven from global demand changes. More stability and security in supply will ensure more stable energy prices. However, given the huge British demand for energy it is felt that to provide the required energy to heat, light and power homes,Britainwill need to have a portfolio of energy sources and production with gas a key component of this. This will mean thatBritainwill need to look for strategic energy deals across the world to ensure supplies reachBritainand that the LNG cargo ships are not diverted to other countries because of higher rates. Otherwise, Britain will find itself in the difficult situation of not having enough energy to meet its demand.

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E.On, the German energy company, has posted a loss of 2.2bn euros for 2011 against a 5.85bn euros profit in the previous year.

The energy supplier has stated that it will turn this position around in 2012 and will return to profit. The two main drivers of this return to profitability are a focus on cutting costs and expansion outsideEurope. E.On like many other energy companies are focusing on reducing their cost base to ensure profit margins are maintained given the volatile wholesale energy market costs. The ability to cut operating costs will also help energy companies be able to implement energy price reductions whilst maintaining profit levels. If energy companies are successful in reducing their operating costs they may choose one option or a combination of both to deliver a competitive advantage over competitors. However, it is important that E.On and the other energy companies do not sacrifice customer service in their drive to cut costs. This will have a significant impact on the customer experience and could actually result in many customers becoming dissatisfied and leave their energy supplier, ultimately impacting revenue and profits. Therefore, the energy companies have a difficult challenge in reducing costs whilst maintaining (and hopefully improving) customer service and experience.

E.On has also stated that it will expand outsideEuropeto drive growth. One of the countries it plans to invest in isBrazil. There are also investment plans within Europe with 2bn euros being invested in wind farms. This will help secure the future energy needs of its customers.

Both of these elements are part of the company’s strategic direction to help deliver its growth targets. The strategic plan has been supported by successes in its renewable businesses.

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The Darlington borough council has unveiled plans to improve some of its housing stock to help its tenants improve their homes.

The plans include improved areas for tenants around the lifeline services offered to vulnerable and/or older people that provides assistance and monitoring in case of emergencies. They also include a range of energy efficient measures designed to help people save money on their energy bills and also reduce homeowners’ carbon footprint.

The borough council has secured around £6m of investment from the Department of Communities and Local Government. This money will help the council deliver some of its energy efficiency targets through the investment plan measures.

This is welcomed by the beneficiary tenants who will receive these home improvements and will benefit from lower heating costs. The range of measures may include upgrading boilers to more energy efficient ones, improved windows to more double and triple glazed ones and even loft and wall insulation.

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Scottish and Southern Energy (SSE), one of the big six energy suppliers, has lost an appeal into a conviction relating to its doorstep sales techniques where it was found that some of its sales advisors had used inaccurate scripts to lure customers away from their current supplier in favour of SSE.

Customers were convinced to switch suppliers believing they would get a better deal than their current supplier and ultimately pay less on their energy bills. This was not truthful and in the cases that led to the conviction, customers were actually worse off and would end up paying more than their current energy bills.

This is another example of the ‘shady’ practices of some of the big six energy suppliers and their doorstep selling. There have been many examples of similar mis-selling practices from other suppliers in recent months that have created a lot of mistrust by consumers towards doorstep sales. Some of the energy suppliers have ceased their doorstep sales activity due to the lack of trust by consumers and the brand impact that it is having on the companies. There is also a view that this type of selling has had its day with few customers actually switching to other suppliers on the doorstep. Consumers are generally savvier and can research the best deals themselves online and even use free switching sites.

It is hard for energy companies to shake off their negative public image with continual examples of letting consumers down. There has been a strong public opinion that energy companies are profiteering. Consumers feel that energy companies are quick to increase prices citing wholesale energy markets as the main cause and are slow to reduce prices when the market prices reduce. This negative view is further supported by the fact that each of the energy suppliers will increase and decrease around the same time and in-line with each other. Consumer groups have joined in the debate and have raised the question ‘that if companies are separate entities and are structured differently why do they all following a similar pattern?’ This is an interesting question and one that has yet to be fully explained. Some of the large suppliers have their own energy producing capabilities with some other companies relying heavily on the wholesale market. This structural difference should create competitive advantages in some companies at different times. Therefore, why would they all following a similar price change pattern?

Negative consumer views have led to protests and even a case where British Gas headquarters were occupied by some protesters. There is a strong public sentiment that energy companies need to do more to help people meet rising costs of heating and lighting their homes. Consumers want to be treated fairly and the mis-selling practices shown by some of the doorstep sales activities by the energy companies do not support this. Energy companies need to put the customer first and ensure they are genuinely doing all they can to help, make a profit to maintain British jobs and pay taxes to the economy whilst stamping out poor practices that are ripping customers off.

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Phil Bentley, the British Gas managing director, has warned that energy bills will probably rise for the next ten years.  This stark warning was made by Mr Bentley this week as he calls for a sensible debate on energy bills. He stated to that consumers are more likely to prioritise paying their sky TV bills rather than energy.

Mr Bentley puts the increases in energy bills down to the level of green taxes imposed by the government as well as the cost of improving the national grid. The green taxes have been implemented by the government to help pay for carbon reduction and renewable energy initiatives to help reduce the impact of fossil fuels on the environment as well as reducing Britain’s exposure to the volatile global wholesale energy market, helping to stablise prices for British consumers. He believes the cost of upgrading the national grid between £80-£100 billion. A huge amount of money that ultimately will be funded by consumers. Mr Bentley also warned that investment in nuclear energy and the building of a new fleet of power stations may also have an impact on consumer energy bills.

In order to mitigate these energy bill rises has recommended that British households look to reduce their energy consumption and become more energy conscious and efficient. By taking these steps consumers will help reduce the impact of higher unit costs as they rise over the next decade.

Consumers will not be too pleased about this warning from the biggest energy supplier in Britain as many feel people feel that the major energy companies have profiteered in recent years will large increases in energy bills. The energy companies do need to make a profit so that they can continue to employ many thousands of people within the economy, pay taxes to the government and also invest in the future of energy supply and security for Britain. So it is important they make a profit but consumers want this to be a fair level and not profiteering especially as household finances become more stretched. Mr Bentley has stated that British Gas only makes a profit margin of 5% on energy bills. This is probably a surprise to most people given the high cost of bills. So it is clear that consumers need to understand how their energy bill is made up especially the levels of tax imposed by the government. This may call into question the level of green tax the government has imposed on energy bills in its drive to meet carbon reduction and renewable energy targets it has signed up to. It is consumers who ultimately pay for these targets and in an environment where household budgets are become more and more stretched there may be a consumer sentiment against government taxes on energy as less anger toward to the energy companies themselves. To achieve this there will need to be greater transparency and education around energy that will become more important as bills continue to rise.

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EDF, one of the big six energy suppliers, has agreed to pay a total of £4.5m after OFGEM, the energy industry regulator, found EDF in breach of regulations for its sales practices to consumers.

OFGEM found that EDF employees had not provided customers with all the necessary and relevant information needed for customers to make informed choices on the best deals and tariffs. This led to some customers not receiving the right information and ultimately losing out on potential savings. This sales practice has been in the media spotlight in recent months with many of the big six energy suppliers ceasing sales practices that have been in breach of regulations. Most notably, the large field sales forces that would sell to consumers on their doorsteps have long been seen as an outdated practice and one that was open to miss selling. Some customers would feel pressured into the sale with others making decisions based on incomplete/incorrect information.

Following the investigation OFGEM provided the details to EDF where they agreed to pay £3.5m to their most vulnerable customers and a £1m payment to the Citizens Advice Bureau. These payments were volunteered in place of a fine as it was seen that a voluntary payment would help customers directly as opposed to a fine or penalty that would be received by the treasury.  The £3.5m payment to customers will be in the form of a £50 refund to those customers who receive the warm homes discount, a total of 70,000 households. This is welcome news by this group of customers as those in receipt of the warm homes discount are usually in receipt of benefits or on low incomes, often in fuel poverty. The payments will help towards energy bill costs reducing a little of the financial pressure on these households. The £1m payment to the Citizens Advice Bureau will go towards the bureau’s best deal campaign that is designed to create awareness with consumers of the best deals and tariffs on the energy market. The campaign will help customers make informed decisions and hopefully save money on their energy bills.

EDF’s payment is another blow to the credibility of the energy industry where many businesses and consumers do not trust the industry or their energy suppliers. The energy companies have faced increased pressure from the government and the general public to reduce their energy prices and help consumers who are struggling to pay their bills. Many feel that energy companies are quick to increase prices and slow to pass on savings when the wholesale energy market prices increase or decrease. This view is compounded when huge profits are made by the major energy companies as seen from the recent round of financial results. Energy companies will need to work hard to regain public trust and build lasting relationships with consumers.

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