Unfortunately energy companies encountered a tougher year than ever this year with wholesale costs of buying electricity and gas soaring to record levels, and the price cap on energy bills meaning they couldn’t even recover their costs from customers.
The result was many ended up in a critical financial situation, or sadly went under.
In 2021 alone, 29 suppliers have ceased trading and their customers have been transferred to other suppliers under OFGEM’s Supplier of Last Resort process. The effects of the crisis will continue to be felt in 2022, so what should suppliers be looking out for in 2022?
Retaining customers who didn’t choose to be with you
The first possible big challenge will be for Suppliers of Last Resort to hold onto the customers they have so painstakingly acquired through the SoLR process. Roughly two million customers have transferred from one supplier to another and a further 1.7m are in limbo with Bulb under a Special Administration. Some customers may be unhappy to have been moved and some delighted they are back with what they see as a more stable supplier. There is of course the challenge that some may find themselves back with a supplier they’d made a deliberate decision to leave.
So, retention will be key, and we may see a lot of switching activity in late Q1 when it’s predicted that cheaper tariffs may become available. As we leave 2021 switching activity is down massively with the main reason being that if you switch you are most likely to see higher prices.
An increase in contact and complaints
Whilst the SoLR process gives a ‘clean edge’ from a billing point of view, it’s likely that many customers will have unresolved issues with their old supplier. As administrators wind down these companies there increasingly becomes less places for customers to go to resolve any outstanding issues. Things like a metering problem, maybe a smart meter not working or a crossed meter set-up, will not be resolved on the SoLR transfer.
The transfer process itself is also likely to draw out issues with start and end meter readings. It’s likely then that suppliers who gain customers could see all of these issues unwind early in 2022 and should ensure they have sufficient resource to be able to handle this additional contact and any complaints that remain unresolved pre transfer.
A drive on smart meters and energy efficiency
I’m no expert on wholesale costs but I’ve read enough to form a view that we are not out of the woods yet in terms of spiralling costs. Add into this the imminent increase in the price cap come April 2022 and there are going to be thousands of families plunged into fuel poverty. Experts are predicting anything between a £400 to £600 a year increase in the cap.
The only element of the bill the customer can control is consumption. In order to reduce consumption, they need to understand how much they are using and when. The simplest way to do this is to have a smart meter installed. This is stage one for customers to take control of their energy usage.
Now more than ever is the best time to promote smart meters to customers, particularly the ones that have previously not taken up the offer. There are already lots of great examples of suppliers doing more to push the benefits of smart metres and how they can avoid the need for estimates and revised bills.
Having the smart meter installed is step one. Just as much should now be done to encourage customers to monitor their energy usage, with more advice on how to reduce it and make savings. Customers have everything to gain and nothing to lose, so ensuring you have the resource for pro-active campaigns during the early part of 2022 is essential to take advantage of this messaging around increasing prices.
Know your vulnerable customers
With some households seeing a potential increase of between £35 and £50 a month in energy bills, it’s a sad fact that those on lower incomes will struggle to pay. This will be particularly difficult for people who may have been on furlough or whose Universal Credit payments have been reduced.
It’s no fault of energy providers but I do think we can expect to see more fuel poverty next year. With bills increasing, I believe it’s essential that suppliers do all they can to identify vulnerable customers earlier and open up communication with them so they can sign-post them to support if needed and help them avoid having to make the desperate choice between heating and eating.
Not all customers come forward to ask for help, and this is where our award-winning ReachOut initiative comes in which is proven to have helped energy providers engage with those struggling to pay their bills and find them the support needed to get them reengaged and back on track.
As we come to the end of another hugely difficult 12 months for energy retail, these are just a few areas where I feel energy firms could focus on over the next year.
For further information or a wider discussion on how we can help your business, contact us below.