NEON, the network of energy ADR and ombudsmen bodies, notes that the new Clean Energy Package proposal aims to expand consumer rights and put consumers at the core of a thriving energy system and provide a better framework to address the new challenges of the energy markets, including energy poverty and vulnerability. Nevertheless, despite numerous improvements, the new package opens the floor to new and difficult questions related to consumer protection ensured by the ombudsmen or ADR bodies. Those concerns matter to price regulation, energy poverty and measures to tackle it, the responsibility of the parties related to the price fluctuation, the right to switch and rules on switching-related fees, and, more worrisome, on the right to out-of-court dispute settlement.
NEON welcomes that customer information is put at the heart of the empowerment strategy, thanks to a better invoice design, improvements regarding the frequency of the bills, and price comparison tools. Those improvements are likely to upgrade consumer information and protection and have a significant impact on the number of complaints received by Ombudsmen and ADR bodies.
Without adequate information consumer’s trust in the market cannot be ensured and the information provided by the invoice should enable customers to better understand what they are paying for and to let them be able to lodge a complaint to the right stakeholder if necessary. The invoice must also continue to inform consumers on the competent ADR entity in charge of resolving any dispute related to billing (invoicing and (e-)billing customer services, redress and privacy corresponded to respectively 47% and 11% of the complaints complaints received in total by NEON members in 2015).
The obligation to send invoices based on the real consumption at least once a year is also an essential step to protect customers from late payment bills which are detrimental to the management of their budget and the monitoring of their consumption and exert their right to switch. The widespread use of independent price comparison tools is an important step forward to enable consumers to choose their suppliers with full knowledge of the facts. NEON will carefully look at the independence criteria of those comparators, monitored by the regulators.
Nevertheless, the Proposal for a revised electricity directive provides a regrettable change in consumer’s right to out-of-court dispute settlement. The current European Commission text gets rid of the mission of the “energy ombudsman”, converting the text to a direct reference to the ADR directive. NEON’s members experience, supported by scientific evidence (C Hodges and others, Consumer ADR in Europe (Hart Publishing 2012)) show that ombudsman schemes are unique amongst systems of dispute resolution in the extent to which they allow for a higher level of engagement for resolving disputes thanks to their independence and impartiality. By suppressing this term, the European Commission restricts ombudsmen and ADR entities’ empowerment, limiting their role to providers of dispute resolution and no longer entities able to feed consumers, market players and policy-makers with useful advice in order to restore the balance between individual (vulnerable) consumers and energy companies and to create a level playing field among the market players. NEON believes Ombudsmen and ADR bodies should be empowered and the Commission to provide concrete actions to strengthen consumer rights and promote the networking of ADR entities. A wider accessibility of those procedures lets more consumers assert their rights and allows NEON to produce better quality data on complaint management.
Furthermore, NEON members acknowledge that the new directive further develops the need for ADR to provide, where warranted, for a system of reimbursement and/or compensation. ADR bodies have to be involved in the setting up of this system for which the basis has alas not been further specified.
With this new package, European energy consumer’s rights to take active roles the electricity market are strengthened, letting them engage with aggregators and energy communities and stimulate self-generation. Consumers are also given a “right” to dynamic pricing, exposing consumers to direct price fluctuations. But evidence collected from member states shows that consumer incomes are not as fluctuating as energy market prices and that consumers, the most vulnerable in particular, have a greater interest in keeping stable and predictable prices over a given period of time. Changes in the price of energy, and in particular of electricity, have a strong impact on the disposable income of households and the number of consumers living in energy poverty. Most of them will not engage to be able to react to price fluctuations, and therefore the impact of this measure will lack consistency. Member states would have the duty to ensure that final customers are fully informed by the suppliers of the opportunities and risks of such dynamic electricity price contract, but the issue of responsibility of those third parties has not been convincingly addressed. Consolidating a right to affordable energy in order to provide a “fair deal” for consumers would have been more appropriate.
Energy poverty should be covered better through a relevant definition of energy-poor households, and a better monitoring of their situation in each member state. But the new package aims to do away with all forms of price regulation, strongly calling for a complete phase-out of regulated prices, even for energy poor, and would also make social tariffs disappear within five years. The prospect of a sustained increase in electricity prices in Europe makes it even more necessary to regulate certain prices in the interests of protecting consumers’ purchasing power and keep their access to the vital need that is electricity.
Indeed, the regulation of retail prices could represent an obstacle to the expansion of demand response and advanced time-based pricing mechanism. But, as expressed in its Proposal for a Consumer Code, NEON believes phasing-out completely of the regulated market may not be an ideal solution for many citizens as existing social security systems and energy saving support measures are not always sufficient to tackle energy poverty. Backed by the expertise of social workers and local welfare agencies in the field, in the absence of sufficient alternative support mechanisms, market-based regulated prices, social tariffs limited to a well-defined group of vulnerable consumers and public service obligations can be (even temporally) useful and helpful to reach the goals of the Energy Union. It would be more appropriate to encourage member states to develop their own innovative mix to address energy poverty and vulnerability in the context of solidarity, as it is the case for renewable energy. Innovations in some member states make it possible, for example, to separate the help for the energy poor from the bill, while preserving the principle of a targeted help allocated to paying the energy bills (cf. the “Chèque énergie” in France).
Concerning the right to switch and rules on switching-related fees, by letting member states the possibility to charge ‘contract termination fees’ in particular cases, the European Commission misses the chance to meet the position expressed in the MEP Griffin’s Report on delivering a new deal for energy consumers (2015/2323(INI)). The current formulation leaves too much space for interpretation, likely to further undermine consumer’s trust in the market and willingness to engage in the switching process and increase the consumer dissatisfaction.
Last year, the European Commission promised a “new deal for consumers”. To make it really happen, NEON calls even more for the implementation of an Energy Consumer Code presented in February 2016, to engage and protect consumers, enrolling ombudsmen and other ADR bodies, as well as policy-makers, regulators, energy providers and other relevant stakeholders to promote shared values and best practice and build a common framework to protect end consumers. Because solidarity and responsibility are the key principles for building trust in the energy markets.
Click here to read the statement in French.