It starts with culture: rebuilding confidence in the energy market

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by Rosemary Sinclair, Chief Executive Officer, Energy Consumers Australia

After twelve months where energy prices have dominated news headlines, customer trust in the energy sector is lagging. According to Rosemary Sinclair, in order to win back that trust, the industry needs to look deep within itself and solve the cultural issues that have led to distrust. 

Consumer confidence and satisfaction with value for money for electricity is at rock bottom – only 44 per cent of us believe we get good value, well below other services like banking (74 per cent) and insurance (62 per cent). Perhaps more significantly, only 24 per cent of consumers say they have confidence the electricity market is working in their interests.

There are real budget issues here for households and small businesses – electricity is a big cost for most people who want comfortable homes, competitive businesses and bills that don’t make them so anxious that they put off opening them. But they also want to know that they can pay their bills without feeling like they’re being ripped off – they want to feel like they are getting good value.

At the heart of fixing these issues and restoring confidence is culture. The banking regulator APRA recently released a sobering report into conduct at the Commonwealth Bank. It found a culture problem at the heart of the bank’s decision making, a worrying disconnect with its customers, a widespread sense of complacency and a lack of accountability to customers.

The bank’s Board accepted all the recommendations of the report. The Royal Commission is now adding to the picture of a sector that is out of touch with the basic needs of its customers.

What’s happening in banking is causing many people to reflect on the question of culture within the corporate sector. What is clear is that an essential service like energy cannot operate in a culture  hat does not meet community expectations. Energy companies with a culture which in the past has said it’s ok to pass through double digit price rises are not meeting the community’s expectations.

Energy companies which do not find the smartest, cheapest way to build and run networks are not meeting community expectations. Rebuilding trust with consumers will take time and must come from the top. We’re hearing positive things at the moment and there seems to be a willingness to change the culture of the industry – the newly formed Energy Charter being developed by energy company CEOs is a sign of that.

The Charter is led by 15 CEOs from across the gas and electricity supply chains who have committed to progress the culture and solutions required to deliver energy in line with community expectations.

The first big test of culture will be whether CEOs and boards listen to consumers who are insisting that prices come down. Consumers know they’re simply paying too much for energy – it just doesn’t pass the pub test that prices would almost double over a decade, explained by the unique issues of the time, but then would not return to more normal levels. Consumers expect to see prices
and bills significantly lower in the coming one, two and five years – they no longer accept small price reductions, or flat prices, as an acceptable outcome.

There are green shoots that point to things shifting: retailers announced price reductions for the first time in recent memory at the end of the 2017-18 financial year – they were modest reductions, but a step in the right direction. We saw network prices starting to come down and perhaps even more encouraging is the range of new, more proactive approaches to consumer engagement by energy networks this year.

The leadership of all energy companies have a choice: they can ignore consumers’ expectations and end up having change forced on them by governments and regulators; or they can meet expectations and recognise it is consumers parting with their hard-earned dollars that power their businesses and the energy sector.

Price is one side of the equation and it needs to be underlined – prices must come down – but a critical longer-term culture piece is helping consumers manage their energy use. This requires much more (and better) engagement with consumers by retailers.

Households and small businesses are already doing the heavy lifting to use less electricity and get control of their bills. The vast majority of households and small businesses have moved to more energy efficient appliances and ever-increasing numbers of consumers have either already moved to solar panels or are looking to do so. There is also considerable interest in new home energy management solutions, with over five per cent of people already purchasing a system, and a further 20 per cent looking to do so. And while it’s early days in the household battery market’s slide down the cost curve, battery storage interest is high, with more than 30 per cent considering procuring that technology.

These efforts are about consumers reaching for control over their costs – they have little confidence the market can deliver, so they are taking matters into their own hands where they can. The problem is that they tell us they’ve already done everything they know how to do. And they are actually losing confidence in their ability to do more, and in the tools available to help them do so.

Our last Energy Consumer Sentiment Survey found that only 58 per cent of households are confident in their ability to manage their use (down 11 per cent), while only half of consumers say they have enough easily understood information available to help them make good decisions about their energy supply (50 per cent, down seven per cent) or the right tools (46 per cent, down seven per cent).

Energy companies need to do more to put the power into consumer hands, to understand where they can save money on the energy they use in their home and in their businesses. It starts with a cultural shift – tackling the energy affordability crisis requires energy companies to work more proactively for their customers on both sides of the ledger – to empower consumers with individualised options, services, tools and information, to help them get control of their energy use and costs; and to get prices down.

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