Regulation can't fix the energy industry

Let's stop pretending it can.

Last week's changes to the energy billing regulations, represent the biggest regulatory change experienced by the industry since privatisation. In fact, they are some of the biggest changes to any regulation, in any industry, and are all the more ground-breaking for directly affecting the way that energy companies sell their products to the consumer. At first glance , this was a simple case of victory for consumers over the corporate world, but the situation is more complex. After all, there's something inherently wrong with the idea of a predominantly consumer "victory" - the right balance of market forces and regulation ought to result in a capitalism that works equally in the interests of producer and consumer. If that is not the case, then it's a clear indicator that something has gone wrong, and that the balance needs to be restored.

These new regulations will go some way towards achieving  that, but they certainly shouldn't be seen as a happy outcome. The costs of any regulation are commonly passed to the consumer, and these changes will be no exception. No regulation is ever set in stone, however, and business leaders in the utilities industry should not give up trying to make theirs the sort of industry that requires less regulation, and not more. Leaders in other regulated industries should also take note. There will be much to learn from how the industry deal with its new regulatory environment, but there is also much to learn from the circumstances that led to such drastic action.

Therefore, it makes sense to examine why the regulator felt compelled to act in such drastic fashion. Regulation may seem to be the lesser of two evils, but the point is that the industry's relationship with its customers should never have deteriorated to the point where that was the case. For business leaders in the utilities industry, the lesser evil really ought to be an investment in building a productive relationship - fuelled by more in-depth insights - with their customers. Indeed, businesses in any regulated industry ought to take this attitude. A more proactive approach to soliciting customer opinion means that management are aware of the strength of customer demand say, for simpler pricing.  The investment required to do so, and the potential losses incurred, will almost always be offset in the long term; if industry practices can produce satisfied customers, then they will have a satisfied regulator as well.

At first glance, it may appear that energy companies have simply played by the letter of the law, but it's really more a case of them forgetting that their fight is with each other, and not with the regulator. There's a lack of competition,  but that's not to say that there are too few energy companies for market forces to be effective - the UK telecoms industry is one of the best in the world, and has fewer major players than the energy market. Rather, energy industry leaders have come to focus on the regulator, and not their competitors. Accordingly, regulators should see promoting competition as a priority, and a huge part of that comes from seeing the voice of the customer as a business resource, not just a matter for the customer complaints department. In a sector with an ethic of genuine competition,  those companies that do not heed the wishes of their customers do not last long. For example, the OFT rarely chastises retailers for unreasonable pricing - consumers do a very good job of that themselves.

I have written previously for this magazine of how we as a public have a vital part to play in building better businesses, and the energy industry is no exception. While it may form a relatively mundane part of our consumer experience, it is nonetheless a costly one, and we shouldn't allow ourselves to be distracted from making our voices heard. Energy companies for their part ought to make a  greater effort to listen, and to act upon what they hear; not only might they find advantages for their business, but the regulators would no longer have to interfere so strongly in the industry. It is right that  the state should step in when business practices within an industry leave consumers with few good options. However, it is the proper function of businesses to provide consumers with as many good options as possible, and that is the case in regulated industries as much as it is in those elsewhere in the economy. If customers are not forthcoming with their opinions then business leaders should do more to obtain their input - surely companies would rather meet the demands of their customers, rather than leaving it to the regulator to do so?

Photograph: Getty Images

Claire Richardson is VP at Verint

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Is defeat in Stoke the beginning of the end for Paul Nuttall?

The Ukip leader was his party's unity candidate. But after his defeat in Stoke, the old divisions are beginning to show again

In a speech to Ukip’s spring conference in Bolton on February 17, the party’s once and probably future leader Nigel Farage laid down the gauntlet for his successor, Paul Nuttall. Stoke’s by-election was “fundamental” to the future of the party – and Nuttall had to win.
 
One week on, Nuttall has failed that test miserably and thrown the fundamental questions hanging over Ukip’s future into harsh relief. 

For all his bullish talk of supplanting Labour in its industrial heartlands, the Ukip leader only managed to increase the party’s vote share by 2.2 percentage points on 2015. This paltry increase came despite Stoke’s 70 per cent Brexit majority, and a media narrative that was, until the revelations around Nuttall and Hillsborough, talking the party’s chances up.
 
So what now for Nuttall? There is, for the time being, little chance of him resigning – and, in truth, few inside Ukip expected him to win. Nuttall was relying on two well-rehearsed lines as get-out-of-jail free cards very early on in the campaign. 

The first was that the seat was a lowly 72 on Ukip’s target list. The second was that he had been leader of party whose image had been tarnished by infighting both figurative and literal for all of 12 weeks – the real work of his project had yet to begin. 

The chances of that project ever succeeding were modest at the very best. After yesterday’s defeat, it looks even more unlikely. Nuttall had originally stated his intention to run in the likely by-election in Leigh, Greater Manchester, when Andy Burnham wins the Greater Manchester metro mayoralty as is expected in May (Wigan, the borough of which Leigh is part, voted 64 per cent for Brexit).

If he goes ahead and stands – which he may well do – he will have to overturn a Labour majority of over 14,000. That, even before the unedifying row over the veracity of his Hillsborough recollections, was always going to be a big challenge. If he goes for it and loses, his leadership – predicated as it is on his supposed ability to win votes in the north - will be dead in the water. 

Nuttall is not entirely to blame, but he is a big part of Ukip’s problem. I visited Stoke the day before The Guardian published its initial report on Nuttall’s Hillsborough claims, and even then Nuttall’s campaign manager admitted that he was unlikely to convince the “hard core” of Conservative voters to back him. 

There are manifold reasons for this, but chief among them is that Nuttall, despite his newfound love of tweed, is no Nigel Farage. Not only does he lack his name recognition and box office appeal, but the sad truth is that the Tory voters Ukip need to attract are much less likely to vote for a party led by a Scouser whose platform consists of reassuring working-class voters their NHS and benefits are safe.
 
It is Farage and his allies – most notably the party’s main donor Arron Banks – who hold the most power over Nuttall’s future. Banks, who Nuttall publicly disowned as a non-member after he said he was “sick to death” of people “milking” the Hillsborough disaster, said on the eve of the Stoke poll that Ukip had to “remain radical” if it wanted to keep receiving his money. Farage himself has said the party’s campaign ought to have been “clearer” on immigration. 

Senior party figures are already briefing against Nuttall and his team in the Telegraph, whose proprietors are chummy with the beer-swilling Farage-Banks axis. They deride him for his efforts to turn Ukip into “NiceKip” or “Nukip” in order to appeal to more women voters, and for the heavy-handedness of his pitch to Labour voters (“There were times when I wondered whether I’ve got a purple rosette or a red one on”, one told the paper). 

It is Nuttall’s policy advisers - the anti-Farage awkward squad of Suzanne Evans, MEP Patrick O’Flynn (who famously branded Farage "snarling, thin-skinned and aggressive") and former leadership candidate Lisa Duffy – come in for the harshest criticism. Herein lies the leader's almost impossible task. Despite having pitched to members as a unity candidate, the two sides’ visions for Ukip are irreconcilable – one urges him to emulate Trump (who Nuttall says he would not have voted for), and the other urges a more moderate tack. 

Endorsing his leader on Question Time last night, Ukip’s sole MP Douglas Carswell blamed the legacy of the party’s Tea Party-inspired 2015 general election campaign, which saw Farage complain about foreigners with HIV using the NHS in ITV’s leaders debate, for the party’s poor performance in Stoke. Others, such as MEP Bill Etheridge, say precisely the opposite – that Nuttall must be more like Farage. 

Neither side has yet called for Nuttall’s head. He insists he is “not going anywhere”. With his febrile party no stranger to abortive coup and counter-coup, he is unlikely to be the one who has the final say.