After the collapse of Iresa, regulators and comparison sites are finally taking customer service seriously.
Back in June, energy supplier Iresa claimed the rare distinction of being banned from taking on new customers for its awful customer service.
The firm’s customer service (or lack thereof) had by then become infamous: its average call waiting time was 40 minutes; it had an average rating of one out of 10 on Trustpilot and had been accused of abusing of direct debits.
Iresa’s 90,000 customers may have known about its customer service problems – complaints first arose in 2016 – but perhaps felt those could be ignored because Iresa was so cheap.
Low prices kept Iresa at or near the top of the comparison sites that many of us use to switch gas and electricity suppliers.
Iresa’s subsequent collapse, along with that of small suppliers Gen4U and Usio, isn’t just a problem for the customers of those firms; it’s a problem for all of us.
If we can’t trust smaller energy firms, then it makes it more difficult for us to switch suppliers, forcing us to stay with more established but more expensive firms.
Only now are price comparison websites and regulators beginning to realise just how important customer service is.
Save £320 - if you dare
If you haven’t switched your gas and electricity supplier for a while, or have never switched, then you’re in for a shock.
In addition to the Big 6 firms of British Gas, EDF, E.ON, Npower, Scottish Power and SSE, there are now a record 67 other licensed suppliers.
They don’t all run power stations of course; most merely buy energy on the wholesale market and sell it to you, including energy generated from renewable sources.
Smaller suppliers can be extremely cheap. By switching away from the average standard variable tariff – which more than half of us are on – to the cheapest deal, you could save £320 a year, according to Ofgem, the regulator.
Many of these new firms have excellent customer service – the top three spots in Citizens Advice’s customer service ranking are occupied by new players So, Bulb and Octopus.
However, so are the bottom three spots, occupied by Green Star Energy, Solarplicity and TOTO Energy.
Out of those 73 suppliers, 60 have tiny market shares, below 1%, and Ofgem has warned that some “have not invested in customer service resources as they grow, leading to a decline in standards”.
If your energy supplier does collapse, the lights won’t simply go out: instead, you’ll be transferred to another energy provider selected by Ofgem.
Once your new supplier gets in touch you’ll be allowed to switch to another supplier without any exit fees. Nevertheless, it’s a hassle no one wants to go through.
How ‘auto-switching’ could improve service
Unfortunately, price comparison websites are not currently required to show the customer service standards of energy suppliers, although some do.
Now a new type of price comparison service could make it easier to avoid poorly-performing firms.
Earlier this month GoCompare launched ‘WeFlip’ a service that will move you to a new energy provider to reduce your bills (it asks your permission first).
In theory, automatically moving customers to the lowest-priced energy suppliers could leave them with firms that have terrible customer service. Furthermore, it could encourage a 'race to the bottom' by forcing firms to prioritise price over service.
However, almost all the auto-switching firms loveMONEY spoke to insisted that they took customer service seriously.
In the case of Flipper, Look After My Bills and Switchd, energy suppliers with bad customer service are excluded from the price comparisons entirely.
Look After My Bills explained that “we have a curated panel of suppliers who we choose to work with which is largely shaped by Ofgem’s complaints data, as well as Citizens Advice rankings, Which? and Trustpilot reviews.
“Iresa has never featured on our panel because of the issues with customer service they had throughout this year before going bust.”
Flipper said they had customers with Iresa but said that these customers had been transferred to other providers after reports of poor service.
In the case of auto-switching service Labrador, customers can select customer service as a preference when setting up the service (Gocompare plans to introduce a similar function on WeFlip).
Labrador told loveMONEY that opting for customer service is “not a decision we think a price comparison website should make for a customer.
Labrador is all about transparency and supporting customer choice and thus encourages the customer to choose whether it is the service that they prioritise over savings or vice versa.”
The firm added that if they received a high volume of complaints about a supplier they’d remove it from the panel and that this had happened before.
Opting into customer service might sound odd, but it’s worth noting that some energy firms already reward customers for not contacting them and that customer service isn’t important to everyone.
Ofgem needs to do more
Whilst they’re useful, today’s customer service rankings can’t predict if a firm will go bad tomorrow, or if its business model is fundamentally flawed.
Ofgem is responsible for licensing new firms and has presided over the huge increase in the number of firms over recent years and subsequent collapses.
The regulator has been criticised by Citizens Advice, whose chief executive Gillian Guy has complained that “it’s currently too easy for new firms to set themselves up as energy suppliers, often before they are able to provide good quality customer service.”
In response, Ofgem announced a review into its licensing arrangements, although the findings will not be announced until November.
In the meantime, you shouldn’t be deterred from switching energy – you could save hundreds of pounds – but take care: no one wants to end up with the next Iresa.
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