Executive summary

Which? welcomes this opportunity to respond to Ofgem’s Calls for Input on: 

• Consumer Outcomes, and,
• Reviewing the Supplier Guaranteed Standards of Performance.

Regulatory reform in the energy sector must primarily focus on enhancing consumer trust, and is the guiding principle of this response. This focus is essential because of the increasing consumer exposure to novel products and services as the energy transition accelerates, and an effective and fair transition can only happen if consumers trust the sector. The Which? Consumer insight tracker shows that the energy sector still remains poorly trusted as a whole, despite many good providers. Consumers continue to experience a wide range of problems and there have been several cases where failures of regulation have undermined wider trust in the sector. 

We are therefore pleased to see that the Consumer Outcomes Call for Input recognises that whilst outcomes-based rules can deliver positive results for consumers, success depends on key conditions being met. The Call for Input also recognises that the argument is not academic - the effectiveness of any regulatory approach depends on the implementation and practice of day-to-day regulation.  

We urge Ofgem to bear in mind the following:

• Ofgem must not take its focus away from the basics of effective regulation: clear expectations, effective monitoring, transparency and timely enforcement
• It is not a binary choice between outcomes and rules-based regulation: (i) the full range of regulatory approaches should be used in combination to improve consumer outcomes, (ii) consumers must be able to smoothly access redress for unlawful treatment based on their individual circumstances
• Outcomes-based regulation in the financial sector has been accompanied by substantial regulatory guidance and Ofgem must incorporate lessons from the experience of this sector to avoid regulatory uncertainty and delay
• The measurement of consumer outcomes will need to keep up to date with developments in the market and consumer priorities

If a Consumer Outcomes regulatory approach can be introduced in a way that is complementary to effective regulation then it could open up some opportunities, including:

• A greater focus on the purpose of customer communication through the energy bill, allowing greater flexibility in how information is presented - although regulation must still ensure that important information such as rights to redress are communicated clearly,
• An improved approach to the regulation of innovative technologies and approaches within the sector,
• The application of regulation based on consumer outcomes to all firms that have a material influence over retail consumer outcomes, as in the financial sector.  

Overall, given the issues experienced in the energy sector over the past few years, it would not be appropriate for Ofgem to move wholly to an outcomes-based approach. We strongly urge Ofgem not to simply introduce Consumer Outcomes that replace the existing rules. Such a move would increase difficulties with enforcement procedures, create regulatory uncertainty in the sector, and have highly uncertain effects on the culture of the industry. 

Turning to the review of the Supplier Guaranteed Standards of Performance, we think that it is important that consumers are aware of the Guaranteed Standards of Performance because greater awareness would both contribute to building trust in the industry and also allow for quicker identification and resolution of instances where consumers don’t get what they are entitled to. To raise awareness we think that Ofgem should:

• Publish consistent information about the number of instances that suppliers have had to pay compensation for failing to meet Guaranteed Standards of Performance,
• Consider a licence condition that requires energy suppliers to raise consumer awareness of their compensation rights. This is an appropriate area for an outcomes-based approach, as it would allow firms the flexibility to identify the most effective times and methods to communicate with consumers.