Our research for Citizens Advice into how to strengthen consumer voices within the regulated industries found that that, in order to be most effective, companies need to design their end-consumer engagement plans in ways that build a mutually beneficial relationship between consumers and companies.
This was based on the rationale that consumer engagement enables consumers to influence how services are delivered, thereby fostering consumers’ trust in the legitimacy of the decisions a company makes. In turn, achieving this sense of trust and legitimacy, is the best way of ensuring that consumers grant a company the ‘social license to operate’.
This report situates energy network companies’ consumer engagement practices within wider engagement theory, concentrating on three distinct ‘spaces’ for consumer engagement:
a) Direct engagement with end-consumers: It demonstrates that while companies have made a significant investment in engaging with consumers during the last 10 years that much of this has been limited to the ‘informing’ and ‘consulting’ levels of engagement. It suggests that if, in approaching RIIO-2, companies simply replicate the work that proved effective for them previously, or the processes they have seen other companies rewarded for, then the impact of direct consumer engagement will not necessarily be ‘enhanced’.
The report further highlights where there are opportunities for companies to widen the focus of their engagement through deliberative approaches: in order for them to involve consumers in exploring new solutions; determine effective trade-offs; and establish effective partnerships to meet the challenges ahead.
b) Consumer representation in Stakeholder Groups: Involving consumer representatives in Stakeholder Groups is a model used by all Energy Network Companies through RIIO-1. The report acknowledges the effectiveness of this model, noting that together representatives from consumer, industry and other professional sectors can act as a ‘critical friend’ to companies and support them to understand what mutually beneficial solutions might be. These groups can also assist them to develop an appreciation of the consequences of decisions for different stakeholder groups.
The report however also recognises that consumer representatives are only one voice among many in most Stakeholder Groups. To deliver their role most effectively, this research highlights that there is a need for consumer representatives to have access to the outputs of direct engagement with consumers, be supported to identify areas where more research is needed, and would benefit from having access to a new model of Consumer Advisory Panels where they could test out ideas and sense-check recommendations.
c) Consumer Challenge Groups: The final space for strengthening the voice and influence of consumers explored in the report is through champions fulfilling a ‘consumer challenge’ function, as Ofgem has indicated it intends to mandate for during RIIO-2.
Our research identifies the ways in which a consumer challenge function differs from the role played by Stakeholder Groups: where a Stakeholder Group is a company’s ‘critical friend’, a challenge group operates as their ‘conscience’, scrutinising and evaluating how well the outputs of engagement have been used to inform business plans.
Our report highlights explores the challenges that introducing this new role will bring to RIIO-2 and makes recommendations about how this function can best be integrated into existing structures and future engagement planning.
The report further identifies the need for company’s consumer engagement strategies to be integrated into, and viewed as integral to, a company’s overall business plan. In doing so it identifies a number of measures that will help companies ensure that they are designing their engagement strategies for success:
- presenting clear goals for their engagement activities;
- articulating intended outcomes (for the company and consumers);
- clarifying the scope of the engagement (i.e. what can, and cannot, be influenced);
- identifying who needs to be involved (i.e. is the topic relevant to all consumers or specific segments of the consumer base?);
- specifying the level and method of engagement needed to achieve these goals;
- recognising the risks of engaging (and of not engaging);
- institutionalising how the outcomes of the engagement will be shared (within the company, with stakeholders, with participants and with consumers more generally); and
- embedding mechanisms for evaluating the success of engagement (including key performance indicators (KPIs) and metrics for measuring impact).
Our Strengthening the Consumer Voice in Energy Network Company Price Controls was published by Citizens Advice in May 2018.