Ofgem’s new customer rulebook evolves

Ofgem plans to changes the rules on how energy suppliers should communicate with their customers.
Published: Mon 11 Sep 2017

The UK energy industry is viewed by the public with much distrust following a series of energy supplier blunders including misselling and billing errors. To improve the customer relationship, Ofgem is suggesting that the current customer contact rulebook be torn up, making way for new ideas around engagement.

In an open letter to the industry, Ofgem says it will embark on a reform of the rules it has for suppliers about when, how and what to communicate with energy customers. This will be carried out through a series of industry workshops over the next few months.

Delivering positive outcomes for consumers

The new approach will be principle-based instead of relying on set rules which are standing in the way of innovation in the energy sector, said the regulator. This will provide consumers with “comprehensive protection” and will promote innovation and competition. It will also put responsibility on suppliers to deliver positive customer outcomes.

However, in areas where the regulator feels there is “only one acceptable way of doing things” and where a clear minimum standard is expected, it will retain prescriptive customer communication rules.

“We’re making changes to further strengthen protection for consumers, and make sure that suppliers treat customers fairly and present information clearly and in an accessible way," said an Ofgem spokesperson.

Neil Barnes, Associate Partner, Consumers and Competition said: “We no longer consider that having a significant volume of prescriptive customer communications rules in our supply licences is the best way to deliver positive outcomes for consumers.

“While there will continue to be areas where prescription is appropriate, we have increasing evidence that our existing prescriptive framework cannot keep up with market developments. The market has evolved and so too must our rulebook.”

Concerns around ‘loose’ market rules

Some industry representatives have already voiced their concern around this development. Some say that the loosening of market rules could leave customers vulnerable. There is a growing concern that with the new independent suppliers in the market, different interpretations could prove to be difficult to police.

Ed Kamm, chief commercial officer of First Utility, said he is concerned that removing certain license requirements could make the level of engagement even worse as big suppliers exploit the relaxation of the rules.

“While we support Ofgem's desire for innovation that is in the best interests of the customer, it is important that it doesn't sacrifice the current regulations which are already having an impact such as the rules requiring firms to tell a customer when their fixed deal is ending," he said.

Currently suppliers must give a customer 49 days notice that a fixed price tariff is about to end and waive exit fees after this point so the customer can shop around for a new deal and avoid being returned to a more expensive standard variable tariff.

Victoria MacGregor, head of energy at Citizens Advice, said the consumer watchdog is working closely with Ofgem as it develops the broader principles for suppliers to help guard against consumer risks and promote innovation in the industry.

She explains: “Having clear and evidence-based principles for energy suppliers could allow suppliers to be more innovative in the ways they communicate with customers, such as by tailoring the information they provide. It could also make it easier for the regulator to hold specific instances of poor performance to account, where these would not have been breaches of narrower rules.”