Citizens Advice has called on Ofgem to introduce tougher licensing rules for energy suppliers to boost customer service standards and prevent rogue companies entering the market.
Dozens of smaller firms have entered domestic and non-domestic energy markets in recent years. Although many of these suppliers can offer cheaper energy deals, many of their customers have also suffered with poor customer service.
The plea comes after Iresa, a small Nottingham-based energy supplier, was banned from taking on new customers due to customer service failings.
Citizens Advice claims that it is too easy for suppliers to set up shop and start serving customers before they have the proper systems and processes in place for delivering good quality customer service.
They claim that this is reflected in their customer service rankings of domestic energy suppliers.
Several small and medium-sized suppliers are near the bottom of the rankings, including Iresa and Economy Energy, a company set up in 2012.
Some smaller suppliers fared better in the rankings, however. So Energy took the number one spot with 4.7 stars, followed by Bulb Energy and Octopus Energy.
“The performance of some smaller energy suppliers raises serious questions for the companies themselves, and shows why Ofgem needs to get tougher on licensing,” said Gillian Guy, the boss of Citizens Advice.
“Ofgem also has an important duty in protecting customers from companies which don’t provide appropriate levels of customer service. The regulator must now take action and tighten the rules for new companies becoming suppliers. Ultimately it’s customers who suffer when firms aren’t up to scratch.”
Ofgem did show that it wasn’t afraid to flex its regulatory muscles this week when it banned Iresa from taking on new customers.
The energy supplier was the subject of numerous complaints, including a 40-minute average wait time for answering calls and concerns about unfair treatment of vulnerable customers.
But this kind of intervention is still rare.
Citizens Advice welcomed the ban, but said that these problems should not have been allowed to develop in the first place.
"The regulator should tighten up its licensing regime so they can prevent poorly prepared suppliers from entering the market in the first place," said Gillian Guy.
If the company fails to correct problems, Ofgem could revoke Iresa’s licence to operate.
How important is service when you change energy suppliers?
Whether you purchase energy domestically or non-domestically, price is always a determining factor when you choose an energy supplier.
But survey research from Which?
suggests that price isn’t everything. And having cheap prices does not always guarantee happy customers.
Which? found that 79% of people said that having a lower price than their previous supplier was an important factor in choosing their current firm. They also found that it was the most important factor for 60% of people.
Going beyond price, people also chose a supplier based on their customer service, an expert recommendation and supplier reputation.
Better customer service was a key factor for 31% of the people surveyed, while a fifth claimed to choose a supplier with a good reputation or one recommended by experts.
Getting a smart meter and environmentally-friendly tariffs were the least common reasons reported for choosing an energy supplier.
Which? found that the top-rated energy companies don’t just compete on price, but also have excellent online and on the phone customer service. Utility Warehouse was one of just four firms that was awarded five stars for phone customer service and they came out on top of the energy supplier rankings.