Energy companies do not “speak the same language” as consumers. This is one of the key conclusions of a major new report launched today by the Institute of Public Policy Research (IPPR), the independent think tank, which looks at the barriers to greater consumer engagement in the energy market.
Keep it simple: Energy bills made easy, a report commissioned by comparethemarket.com, looks at the causes and possible solutions to the current low levels of switching in the UK energy market. It highlights current confusion around bills as a major barrier for people looking to take advantage of more competitive deals. A number of people within consumer focus groups said that they felt energy companies ‘did not speak the same language’. Other barriers to switching identified by the IPPR include a lack of trust in energy companies, physical barriers such as a lack of internet access and a lack of awareness of the ability to switch.
The report analyses a range of other issues within the energy market relating to consumer engagement, including how the wide roll out of smart meters will impact homes, the billing process and the content of bills. It analyses further billing processes in similar ‘utility’ markets and comparable energy markets abroad in order to learn lessons about Britain’s energy market could improve.
Following the release of this report, comparethemarket.com is launching a Simple Bills campaign, calling on Ofgem to mandate energy providers to simplify the information presented to customers on their bills by following a standardised format with clear, jargon-free language. As part of the report, based on the findings from consumer focus groups, the IPPR has produced an example of what a simple bill could look like (see below).
Peter Earl, Head of Energy at comparethemarket.com, said :“Customers are being impacted by an overload of energy jargon which confuses and breeds anxiety and inertia. The fact that over two thirds of British households are on standard variable tariffs and not taking advantage of the competitive deals available, indicates that the market is not functioning properly. At the centre of this lack of engagement, is a communications system which many find confusing and this is ultimately putting a significant barrier in the way of incentivising people to switch.
“This report is a positive step in identifying where the issues in the energy market lie and ways in which regulators and energy companies can improve the system to help reduce the financial burden on consumers. However, action needs to be taken to ensure that people are getting information that they need and vitally, that it is clear so they can understand it and act upon it. We need a bill jargon bonfire, and it is time to light the match.”
Hywel Lloyd, Associate Director at the Institute of Public Policy Research, said: “Energy prices are once again making headlines. As some suppliers raise their prices, commentators highlight the challenge facing any government to ensure the ‘market’ for domestic energy is fair, transparent and giving customers a good deal. Meanwhile, political parties have made manifesto pledges to act.”
“But, as the economy continues to fail to deliver shared prosperity, there is a real urgency to making energy bills easier to understand so that consumers can make the most of“
Peter Earl added: “Mandating the energy suppliers to adopt a standardised bill format, such as this, would provide consumers with clear and jargon-free information that allows them to make informed decisions about their energy consumption and provider. Combining this standardised, simple billing with timely text alerts to prompt action by consumers, would go a long way in helping households to avoid paying over the odds for their energy.”