Changes ahead for consumer standards – Reacting to Ofgem and FCA guidance

Ofgem has launched its Statutory Consultation on Consumer Standards, building on the findings from its Market Compliance Reviews, where suppliers across the industry were scrutinised for customer service weaknesses among other compliance areas. Ofgem assessed 17 suppliers across four key services areas and found 52% of its outcomes were either moderate or severe weaknesses.

As we approach Winter, the cost of living crisis is set to enter another challenging phase. Customer debt levels are forecast to continue rising, despite some commentary suggesting that the industry’s debt problem has already peaked.

With all of this in mind, Ofgem has chosen now to target change in the way that customers are treated. Suppliers must make a concerted effort to offer genuine customer support over these next few months, ensuring that their capabilities are developed to a point where great customer service can be delivered consistently.

Elsewhere, but on a similar note, the FCA’s Consumer Duty went live last week. We’ll explore this in more detail towards the end of this blog, highlighting the similarities in the FCA’s approach to that of Ofgem, and how this will impact those in Financial Services.

Ofgem’s Consumer Standards – What’s it all about?

Ofgem is introducing a number of specific changes to licence conditions through the consultation but also introducing Contact Ease Guidance, which suppliers must “have regard to”. The new rules include:

• Suppliers’ enquiry services should be contactable outside of standard working hours
• Suppliers should have a 24/7 enquiry service for customers without power or gas, where it’s the supplier’s responsibility to resolve the issue
• Suppliers should identify and prioritise domestic customers in vulnerable situations, who may require immediate assistance, or representatives acting on their behalf
• Suppliers should engage earlier to understand the customer’s ability to pay and offer repayment plans where necessary, including repayment holidays

We’ve seen significant upheaval and scrutiny in the Energy industry over the past few years, whereby cost reduction strategies have been at the forefront of decision making – but has this been detrimental to the consumer?

Statistics show that customer satisfaction is on the decline, with the new Consumer Standards seeking to reverse this trend, as the market and its surrounding factors continue to present difficulties.

Although the long-term impact of wholesale price changes has been unprecedented for suppliers, Ofgem recognises a need to ensure high-quality standards of customer service, starting with this statutory consultation.

How can suppliers prepare for these changes?

Ofgem’s new customer-centric principles must be considered in line with your current landscape, taking proactive action to ensure that you’re fully prepared for the upcoming changes.

• Understand the proposals and the key impacts to your business. Record the specific requirements and deadlines to ensure timely compliance
• Review your current customer service processes. This will provide a holistic view of where you are now, and help you to identify areas for improvement. This may include streamlining communication channels, enhancing resolution mechanisms, or improving SLAs for customer queries
• Monitor compliance. Establishing an internal monitoring process will help to ensure that consumer standards are consistently met. Regular audits and assessments will prompt you to identify key areas of non-compliance, allowing for swift corrective measures
• Enhance transparency and communication. Reviewing your billing information, tariff details, and simplicity in pricing structure, are all ways to become more transparent with your customers. Information should always be easily accessible for customers too

The FCA’s Consumer Duty – Cut from the same cloth?

As mentioned above, the FCA’s Consumer Duty went live for new and existing products last week, holding financial markets to new standards of consumer protection. Since the FCA set out its Consumer Duty in July 2022, firms have had a year to implement the necessary changes.

Under the Duty, the FCA will be holding businesses accountable for delivering positive outcomes for consumers, with an increased focus on intervention when this isn’t adhered to. The FCA’s positive outcomes relate to:

• Products and services
• Price and value
• Consumer understanding
• Consumer support

While the FCA’s Consumer Duty looks similar to Ofgem’s Consumer Standards on the surface, the latter is a far narrower and more prescriptive implementation to remedy gaps in Ofgem’s Standards of Conduct (“Treating Customers Fairly”) framework introduced in 2017. These new standards are, arguably, already enforceable under this framework but now will be far easier for Ofgem to enforce going forward. The Market Compliance Review findings clearly show it struggled to enforce this principle-based framework.

As the FCA doubles-down on principle-based regulation supplemented by prescriptive rules, Ofgem reverses its previous direction of travel and reverts to prescriptive-forward regulation.

How can we help?

Ofgem’s new rules will most certainly add to the existing market pressures that suppliers are facing. It’s an additional hurdle to navigate, requiring a genuine focus on the needs of customers, and your ability to meet and exceed these during challenging times.

At BFY, we hold extensive customer service expertise, backed by real-world experience across Energy, Utilities, and Financial Services. We’re continuing to support suppliers with delivering great outcomes for customers, including:

• Customer centric strategy development
• Identifying growth opportunities and competitive advantages
• Delivering Operational Excellence programmes
• Process improvement and optimisation
• Strategic transformation

For more information on how we can help, contact Jonathan Paton or Ashley McLeod.