Tariffs row turns orbs into political footballs

Things have got so bad that the utilities are now a political football. Conservative leader David Cameron this week demanded a competition inquiry into the domestic energy market, to “ensure that people are getting a fair deal”.

They aren’t, but the utilities companies have little to fear on this count since Cameron’s initiative will almost certainly fall flat. And, even it succeeded, the chances are that any investigating team would encounter the same kind of paralysing legerdemain and obfuscation over pricing policy that confronts the average consumer attempting to make sense of electricity, gas and broadband tariffs. Result: an inquiry likely to run into the sands.

We might, in passing, ask how a sector which is considered deeply boring by most outsiders, has come to achieve a certain notoriety on account of its marketing tactics; marketing tactics which, in their own way, now outclass the confusion techniques beloved of banks and telecoms companies.

The answer may partly be found in the weak regulatory environment, following liberalisation in the early 1990s, which allowed thousands of utility sales staff to roam the streets of Britain, unsupervised and unconstrained by proper training, in an uninhibited assault on British Gas’ quasi-monopoly. But this, as it were, only set the scene with the public.

Utilities’ products tend, by their nature, towards commodity status: it is therefore hard to build up a brand proposition (for example, trust) that consumers will actually believe in.

The result has been a partnership in cynicism. Consumers have been persuaded that, in an area of low novelty such as this, price promiscuity is the best policy. Utilities companies, aware that – broadband excepted – their one trump card is indispensability, have used cartel status (at least we’ve moved beyond monopoly) to meet that demand by manipulating tactical price policies around fluctuating world prices.

To be sure, there are genuine consumer benefits to be had in such platforms as British Gas’ Click Energy or npower’s Gas Guardian tariff. But a true appreciation of competitive differences between most tariffs would require a lawyerly attention to small print that is beyond the majority of us.

And the nasty spat between BG and npower over who is ripping off the public more is a reminder that the construction of these packaged products is as much about providing a platform for intra-industry warfare as it is about public service.

In short, the utilities industry is rather like an increasingly sophisticated child, born around 1990, that still has a lot of growing up to do. Luckily, the fraught journey through adolescence is being mentored by increasingly prevalent online price comparison mechanisms – in this as in other sectors. These have their faults (witness the hullabaloo over uSwitch’s impartiality), but there is no doubt that they are a force for good. They make increasing transparency between the various offerings de rigueur, hugely simplify complex correlations and generally make the task of selection and monitoring a great deal less tedious for the consumer.

As for the utilities companies, they may comfort themselves that they will safely kick David Cameron’s initiative into touch this time round. But allowing yourself to be made into a political football in the first place is, I’m afraid, an obvious sign of continuing immaturity.


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