UK Government consultation on the role and powers of the energy ombudsman

Tackling Barriers to Accessing the Energy Ombudsman’s Service (Q1 – 4)

Currently, the Energy Ombudsman (‘EO’) acts as an independent dispute resolution service for consumers and energy suppliers. The EO plays an essential role as an arbitrator of consumer complaints that it has not been possible to settle between the parties in a reasonable time. However, consumers can only access this service if they are made aware of the EO and choose to access its services.

Consumer Scotland supports enhancing access to the EO by raising awareness of its services and placing a greater onus on suppliers to support consenting consumers to access its services. However, the implications of an automatic referral process warrant careful consideration, particularly for consumers already engaged with advice and advocacy services or consumers in vulnerable circumstances.

The automatic referral or introduction of the EO into a process may confuse and complicate what is already a stressful complaint journey for consumers. For vulnerable consumers who rely on a trusted adviser, there is a risk that an automatic referral may feel like a loss of control over their own information and affect their confidence in the process if they were not fully informed or ready for that step. It is also unclear how it might interact with the existing advice advocacy landscape in the energy market. Advice Direct Scotland, the Extra Help Unit and Citizen Advice Scotland report supporting thousands of consumers in Scotland each quarter.  Some consumers may need more personalised guidance or help navigating complex issues, such as back billing or metering issues. There is a risk that an automatic referral to the ombudsman and its arbitration model may inadvertently bypass crucial support that consumers need to understand their rights and navigate complex issues.

Any measures to improve access to the EO needs to be person-centred and flexible, making sure consumers in vulnerable circumstances still have a say in their privacy and ensure that these consumers aren’t automatically pushed into a formal process without tailored support.

Based on the currently available evidence and to ensure consumers continue to feel in control of their complaint journey, we recommend that DESNZ adopt its first two proposals for tackling low awareness and inconvenience in accessing EO services: (i) advanced signposting – improving signposting by suppliers; and (ii) auto-onboarding of consumer details – taking some of the burden away from the consumer in the complaint process where the consumer has consented.

Consumer Scotland recommends that the third proposal, pro-active outreach, should be further tested with consumers to understand how it may affect their complaint and advice journey.

While several Ombudsman services are working to improve awareness of their services with consumers, a pro-active outreach proposal for an ombudsman would be novel in the UK consumer market. The effects of this new approach need to be well understood through trials and testing to avoid any unintended consequences, such as those described above, before they are considered for full implementation. We support the voluntary “Access for All” trial currently being conducted by the EO and energy suppliers as a good place to test automatic referral, what benefits it can bring to the consumer complaint journey, and insights on consumer outcomes or potential unintended consequences that may be generated by a pro-active outreach approach.

We would further suggest that DESNZ consider whether a deadlock letter remains a useful feature of the complaints escalation process. This is an extra step in the process for consumers and suppliers, the necessity of which is questionable where a consumer may be able to demonstrate from existing communication with their supplier that a mutually agreeable solution is not achievable.

Enabling Fairer and Faster Redress for Consumers (Q5 – 8)

Consumer Scotland agrees with shortening the waiting time before a consumer can refer their complaint to the EO to 4 weeks with exceptions. The existing waiting time of 8 weeks is too long. It can cause significant financial strain if the issue involves billing disputes, and contribute to increased stress and anxiety for consumers who are already dealing with service issues. It can also undermine consumer confidence in the dispute resolution process itself if consumers feel their concerns are not being taken seriously and addressed promptly, as is recognised in the Legal Ombudsman’s Best Practice Complaint Handling Guide.

Consumer Scotland accepts that there may be valid exceptions to this 4-week waiting period where there are issues beyond the immediate control of the energy supplier. An example of this may be where there are smart meter problems caused by faults in the Data communications Company (DCC) network. Extending the waiting period may be appropriate where certain narrow instances where the supplier may not have the powers to resolve the issue itself. However, the extension should not be unlimited. And suppliers must continue to update consumers on the progress of such issues, outlining what they are doing to keep achieve a swift resolution for the consumer and signposting them to appropriate services should they require further advice and support for protracted cases.

In the case of an issue with the DCC, other immediate redress provisions are available. This includes Ofgem’s recent decision to close the accountability gap in recent reforms of the Guaranteed Standards of Performance (GSOP) so that consumers would receive compensation for smart meter issues caused by the DCC. This strikes a fair balance between fairness for both supplier and consumer, and accountability.

Remedies and Enforcement Powers (Q9 – 12)

Ensuring the EO has effective enforcement powers is crucial to ensure that the decisions of the EO lead to genuine positive outcomes for consumers. Achieving swift redress benefits gives consumers greater confidence that their complaints will lead to tangible improvements and should help to build trust in the energy system as a whole. Recent Ofgem research has highlighted that the proportion of consumers that trust energy suppliers to be fair in the way they deal with consumers is only 41%.  Albeit this is an increase on recent years, it is still low compared to other markets such as financial services (60%) and broadband suppliers (45%).  An effective arbitration and impartial dispute resolution process can help to improve the energy sector’s performance relative to other markets.

Consumer Scotland recommends that energy suppliers that fail to engage with EO processes or to implement their decisions within 30 days should face a financial penalty. Of the proposals presented, the flat rate or GSOP-style payments are our preferred approaches to fairly compensate consumers and incentivise suppliers to deliver timely outcomes. A compensation payment, such as a flat rate amount, is more straightforward for consumers to understand and would bring energy more in line with other sectors such as rail, where consumer satisfaction with the “delay repay” compensation process is high.  Further, as the GSOP mechanism has existing processes around it, it should be easier for suppliers to implement and consumers may already have a level of familiarity with it. We would note, however, that the GSOP framework is currently under review by Ofgem – we would recommend that DESNZ ensures that any recommendations in the context of EO enforcement are joined up with any updates Ofgem makes to the framework going forward

Cooperation Across the Consumer Landscape (Q13 – 14)

The advice and support landscape Scotland is split between different charities and consumer groups. Advice Direct Scotland and the Extra Help Unit provide first-tier and second-tier advice functions respectively, and organisations like Citizens Advice Scotland and others provide additional advice services. The proposed changes to the EO, while beneficial to consumers, will require improved cooperation between advice bodies, the EO and suppliers to ensure that there are no unintended consequences that are detrimental to consumers.

Energy suppliers should update their guidance and internal training to clearly identify the purposes of different bodies, especially across different jurisdictions, so that consumers are signposted and referred to the correct organisations. DESNZ should adopt learnings from Ofgem’s recent Debt Standards work that highlighted these issues, and has developed best practice for how suppliers and advice bodies work together to support consumers in debt.  Advice bodies and the EO should also formalise any guidance or Memorandums of Understanding to ensure the respective role of each organisation is clear, and that signposting and referral points are clearly articulated.

DESNZ should explore proportionate data-sharing agreements between suppliers, advice bodies and the EO. Caution is obviously required around consumer privacy and consent. But assuming these can be adequately addressed, data-sharing can help to remove duplicate requests for information from consumers, reducing frustration and accelerating complaint resolution times. Maximising the effectiveness of data-sharing may require the creation of a shared taxonomy around vulnerability categories, for instance, which could be explored in the longer term.

Legal Standing and Governance (Q15 – 16)

While Consumer Scotland acknowledges the potential benefits of placing the Energy Ombudsman on a statutory footing, we believe that the current consultation does not fully explore all relevant factors. In particular, we think it is worth considering whether improved outcomes could be achieved by enhancing enforcement action (eg automatic penalties for failure to engage with EO investigations or comply with its decisions).

Creating another statutory body within the energy market could increase the complexity of a landscape in which there are already questions around the boundaries of responsibilities between parties – e.g. DESNZ, Ofgem and NESO. And setting out the role of the EO in law could limit how nimble it can be in response to changes in market conditions, as further legislation may be required to reflect new issues as they arise. If the EO was to be put on a statutory footing, the powers it is given must allow it to adapt to a quickly developing energy retail market where the advent of smart and digital products may change the way consumers interact with suppliers, and the nature of complaints that arise.

As such, setting the EO up as a statutory body is not unequivocally a positive move. The drawbacks as well as the potential benefits should be carefully assessed by DESNZ before proceeding with any change. And, in general, we would recommend that other ways to improve the effectiveness of the EO be explored first before ascribing a role for it in legislation.

Consumer Scotland is the statutory body for consumers in Scotland. Established by the Consumer Scotland Act 2020, we are accountable to the Scottish Parliament. The Act defines consumers as individuals and small businesses that purchase, use or receive in Scotland goods or services supplied by a business, profession, not for profit enterprise, or public body.

Our purpose is to improve outcomes for current and future consumers, and our strategic objectives are:

• to enhance understanding and awareness of consumer issues by strengthening the evidence base
• to serve the needs and aspirations of current and future consumers by inspiring and influencing the public, private and third sectors
• to enable the active participation of consumers in a fairer economy by improving access to information and support

Consumer Scotland uses data, research and analysis to inform our work on the key issues facing consumers in Scotland. In conjunction with that evidence base we seek a consumer perspective through the application of the consumer principles of access, choice, safety, information, fairness, representation, sustainability and redress.

The Consumer Principles are a set of principles developed by consumer organisations in the UK and overseas.

Consumer Scotland uses the Consumer Principles as a framework through which to analyse the evidence on markets and related issues from a consumer perspective.

The Consumer Principles are:

• Access: Can people get the goods or services they need or want?
• Choice: Is there any?
• Safety: Are the goods or services dangerous to health or welfare?
• Information: Is it available, accurate and useful?
• Fairness: Are some or all consumers unfairly discriminated against?
• Representation: Do consumers have a say in how goods or services are provided?
• Redress: If things go wrong, is there a system for making things right?
• Sustainability: Are consumers enabled to make sustainable choices?

Our response has been framed by our Consumer Principles. Reviewing policy against these principles enables the development of more consumer-focused policy and practice, and ultimately the delivery of better consumer outcomes.