New Ofgem Consumer Standards

What do the New Ofgem Consumer Standards mean for your organisation?

Following extensive consultation with energy suppliers, businesses, consumers and other organisations, Ofgem has announced a new set of standards for customer servicing which are aimed at creating better outcomes for domestic customers. The standards are set to go live at the end 2023, and will potentially create new challenges for energy firms.

The proposal:

1. Requires energy supplier enquiry lines to stay open longer, including evenings and weekends, with other channels (such as email, webchat or other digital-based platforms) being more responsive to customers
2. Mandates more effective support for customers struggling with bills, including early intervention to identify issues and proactively offer support (such as temporary repayment holidays when consumers are unable to pay)
3. Requires that customers in vulnerable situations – or their representatives, both of whom may need immediate assistance – are prioritised
4. Stipulates 24/7 emergency support is available for customers who are cut off from their power or gas supply due to issues with their supplier (e.g. meter faults)
5. Compels suppliers to make more information available on customer service performance to help inform consumer choice when switching, and further drive improvements in service.

Ofgem cites a decline in customer satisfaction across domestic energy suppliers as a driver for introducing the new Consumer Standards. Energy suppliers are dealing with a number of complex challenges, including a cost-of-living crisis and energy market fluctuations which have made customers more engaged than ever with their energy bills.

The cost-of-living crisis has led to real struggle for millions of people, and more often than not, utility companies found themselves at the centre of this crisis. The crisis brought consumer’s utility firms to their direct attention, with increased bills, negative press, the fact that there was no point in changing provider, it was inevitable that consumers were going to take a dim view of their utility firms. We see the cost-of-living crisis reflected in a much steeper decline in Ofgem’s overall satisfaction data, starting from Q1 2021.

This is backed up if we look at utility data from the Citizens Advice Bureau (CAB). The CAB publish detailed statistics on utility firm performance every quarter. CAB ratings for utility firms have remained mostly stable up until 2020 but started decline from the winter of 2020/21 onwards. Complaints (those made directly to the CAB, Extra Help Unit or Ombudsman Services: Energy), have steeply increased for a wide range of suppliers from 2021 onwards across the same timescales. Finally average wait times significantly increased between 2021 to 2023, and have only recently stabilised. It’s clear that utility firms have struggled with increased pressures from customer demands over the last few years, and the resulting fall in customer satisfaction is perhaps no surprise.

Ofgem is attempting to ensure the appropriate focus is placed on consumers and is using this as a baseline to justify the changes. They highlight the practical and emotional barriers to consumers getting the best service from their energy suppliers and find that this is a particular challenge for the most vulnerable. There will be a wide variety of considerations for energy firms – from infrastructural to cultural – but here, we focus on what this means for front-line customer service teams who interact with customers on a daily basis.

Considerations for firms

Firms will understandably be thinking about the impacts of these measures on their operations. There’s no doubt the changes will benefit consumers, but energy firms will want to ensure that their changes are proportionate and conducive to the improved customer experience they are expected to deliver.

If the new standards are embedded effectively, firms can establish a competitive edge through their customer satisfaction performance – something not to be underestimated as the expectations of consumers across all industries continue to increase.

Longer opening hours

This will require energy firms to look at shift patterns and contracts, and may necessitate more staff on payroll in order to deliver the productive hours required. Firms with existing outsource arrangements may fare well here, as their commercial arrangements often allow them to draw down only the hours they need.

The requirement for other channels to be more responsive presents an opportunity for firms. In our Complaints Outlook 2022 report, we found that people are happiest using their preferred channel. Evidence showed that customers’ complaints journeys start off poorly if they are forced to use a less favourable channel. Firms that correctly engage with a variety of channels (in particular digital channels) are likely to engage their customers better, balance customer demand and ultimately boost their reputation.

Remember though, additional channels need to be designed to meet customers’ functional and communication need and signposted effectively – the spirit of the standard isn’t about call deflection and cost saving but providing a more holistic experience for customers.

Enabling more effective support

Support can be most effective when firms use data to identify customer needs and intervene early. Thinking through customer scenarios and redesigning policy and processes to better support customers can enable you to do this effectively. An example of early intervention is pre-arrears in financial services firms. The financial services sector has leveraged data on customer payments (missed/partial/declined) and used it to drive early intervention with considerable success. Energy firms should consider whether there are similar opportunities to enable more effective customer support.

Prioritising customers in vulnerable situations

The identification and prioritisation of vulnerable customers is increasingly central to firms’ obligations. We understand how difficult this is, our own research suggests that two thirds of vulnerable customers don’t even know they are vulnerable and agents are often overconfident in their abilities to identify those in vulnerable circumstances. Developing a policy that defines vulnerability and processes that provide the requisite customer support and signposting is critical to being able to deliver on this obligation. Suppliers will need to be able to rely on the data they hold on their customers while meeting high bars for service, prioritisation and data security.

Front-line staff play a huge role in the effectiveness of firms’ efforts, too, so ensuring they are armed with the up-to-date knowledge and support they need is vital. Wherever training and competency responsibilities lie – with an outsourcer or in-house – firms should consider whether the right skillsets are being developed and recruited within their front-line teams, and what training, coaching support and operational guidance is available to Agents, Managers and support staff. Accurate data gathering, effective application of policy and empathy and rapport building skills within the front-line will be more important than ever moving forward.

Making 24/7 emergency support available

In part, the inherent capability for 24/7 support comes down to scale – larger suppliers may have this capability already, but many firms may find it more cost effective to outsource overnight service to a customer service specialist, where economies of scale come into play.

Customer service performance information

With service performance more visible, firms will want to ensure they are consistently delivering high levels of customer satisfaction, to help attract new customers and deter existing customers from switching. In light of this drive for more transparent performance information, one key metric providers should consider is the ease with which customers can contact them. It is evident consumers are finding it increasingly difficult to contact their utility firm - Ofgem data shows the number of people struggling to contact their provider has doubled over the last three years, and the CAB ‘Ease of Contact Score’ has been trending downwards during this period (though the later has made a positive comeback in the last two quarters).

Monitoring and reporting

Monitoring and reporting mechanisms should also be established to gather Management Information (MI). This data will be essential for demonstrating compliance with regulatory requirements set by Ofgem. Firms should ensure that the new standards for identifying and supporting vulnerable customers are effectively monitored and integrated into their operations.

Short Ofgem timeline

Effective implementation and thorough embedding of these changes takes time, couple this with an already short timeline outlined by Ofgem and it’s clear that getting organised early and securing the right support is crucial. Our experience in supporting clients of all sizes has shown that the journey towards aligning with these regulatory changes can be intricate and demanding. Therefore, it is imperative to begin this process early and seek the necessary expertise to navigate the evolving landscape successfully.

Firms can also explore the option of partnering with high-quality outsource partners to ensure these guidelines are met in time and that the provision of 24/7 multi-channel support is available. Huntswood has extensive experience supporting firms who are seeking to navigate and embed regulatory change. Delivering better outcomes for vulnerable customers, in particular, has many challenges - our team has supported clients of all sizes to embed high quality policies, processes and training, delivering better outcomes for the firm and their customers. Huntswood can:

1. Review and enhance your vulnerable customer policy, to ensure it identifies all relevant types of vulnerabilities and sets out key principles for how your business provides support
2. Review current processes to determine whether they meet the future vulnerable customer prioritisation requirements, and recommend enhancements to meet those needs
3. Design and deliver high quality vulnerable customer training for front-line staff
4. Review management information and recommend enhancements to allow the business to track key metrics to demonstrate adherence to Ofgem’s new Consumer Standards

With our expertise spanning operational delivery, advisory/consultancy services, and learning and development, Huntswood is well-positioned to support firms affected by these regulatory changes, providing effective solutions for a more customer-centric approach.