The National Audit Office tells Ofgem and Ofwat they must do more about customer concerns

by Ian Sinkamba Domestic Energy News

The National Audit Office tells Ofgem and Ofwat they must do more about customer concerns

Regulators encouraged to be more proactive in service the needs of energy consumers to help raise industry standards

The National Audit Office has stated while the UK’s four main regulators, including Ofwat and Ofgem, have outlined high level aims such as “high quality, good value services”, more needs to be done to put measures in place to benefit consumers in practical terms. The NAO also states that regulators need to prove they are responding effectively to consumer concerns and offering protection to those who need it.

The report also adds that regulators are relying too heavily on the actions of the suppliers they regulate, as well as the behaviour of consumers and stakeholders to understand what influence their actions are having on consumers. As a consequence, regulators are finding it difficult to distinguish between the sector and their own performance.

What does this mean for businesses and households in the UK?

Put simply, the findings of the NAO suggest that bodies such as Ofgem are working reactively to consumers’ problems, rather than being proactive in guiding the energy sector. While it is the responsibility of all stakeholders in the energy industry to raise standards and satisfy customers, regulators are now being encouraged to put the right framework in place for operators in the sector.

A penalty for loyalty?

The NAO found that the most common problem across regulated sectors lies in debts associated with paying bills and credit repayments. The overall rise in energy prices since 2007 (28% in gas, 37% in electricity and 6% in water) has only exacerbated this problem in the energy market. With prices on the rise, it is difficult for energy customers to access the best service, which means those who don’t switch providers typically pay more, in what the report has called a “loyalty penalty”. This penalty is thought to cost consumers an estimated £4.1 billion a year across all four sections, which include energy, water, finance and broadband. The NAO admits that regulators have developed a good understanding of these customer issues, but government and other stakeholders have expressed concerns about whether the sectors are working as well as they can for consumers. As a result, the NAO suggests that regulators must do more to measure their performance so they can gain a clear idea of what is working well for consumers and what isn’t.

Head of the NAO, Amyas Morse, commented:

“Regulators need to do more to show the concrete results they are aiming to achieve for consumers. I understand that there is a difficult balance to be struck between long and short-term outcomes, between the needs of businesses and the interests of consumers. But at present, the regulators’ results can come across as somewhat academic and detached from people’s practical concerns and pressures.”

Ofgem and Ofwat respond

Both Ofgem and Ofwat have issued responses to the NAO’s report. A spokesperson for Ofgem said: “Ofgem exists to protect energy customers, particularly those in vulnerable circumstances. We agree with the National Audit Office that regulators need to effectively measure their impact to help deliver the best possible outcomes for consumers.

_“Ofgem has already made progress in this area; last year for example we published our first Comsumer Impact Report measuring how much our regulatory decisions were expected to benefit consumers and we also publish annual reports on the state of the energy market and ton the situation of vulnerable consumers.

“We’ll keep working closely with our other regulators to identify what further steps we can take to improve the way we measure our performance.”_

Meanwhile, a spokesperson from Ofwat added: “The NAO has found that we have a good understanding of customers and monitor their experiences effectively. Given how important it is for us to protect customers, it is great that they have identified it as a strength. The NAO is challenging us to do more to track and demonstrate how we do this and we are already working on implementing their recommendations.”

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