Letter to Which? outlining SSE's position on 'The Big Switch'

12 Mar 2012

SSE is very supportive of your organisation’s objective with regard to the Big Switch – namely attempting to encourage consumers to get the best deal from the energy market. In its current form, however, I am afraid that SSE will be unable to participate, for the reasons outlined below.

In October 2011 SSE released its Building Trust commitments. These included commitments to:

• ensure all of its customers (existing and prospective) would have the opportunity to access all of its products;
• not engage in predatory pricing activity - ie SSE will not cross-subsidise certain customers to the detriment of others;
• reduce and simplify tariffs - SSE recently implemented this by reducing tariff numbers from 64 to 4; and
•  significantly improve its already sector-leading customer service offering.

SSE believes that participation in the Big Switch auction, as it currently appears to be designed, would break these commitments for the following reasons:

1. The deal will not be available to all customers by nature of it being a one-off auction and being available only to those who have signed up to the Big Switch.
2. The auction requires SSE to offer an initial tariff "bid" below standard market rates - this would mean automatic cross-subsidisation between customer groups, which SSE regards as predatory pricing.
3. It involves creating a new tariff, which runs counter to SSE’s tariff simplification agenda and would cause tariff proliferation, which has been criticised by Ofgem and consumer groups, and which seems inconsistent with the general approach favoured by Which?
4. The auction is purely based on price, which means the pressure Which? has (rightly) been putting on the industry to raise its standards is effectively excluded from the process.  This means, for example, that the Big Switch takes no account of the distinction between SSE’s recent 5* rating from Consumer Focus and EDF’s 0* rating.
5. It appears to risk breaking well-established Supply Licence conditions in relation to “cost reflective” and non-discrimination obligations.  This will obviously be of concern to Which? given its comments last week urging Ofgem to take a ‘firm approach’ to energy companies found breaching their licence conditions.
6. The Big Switch will not necessarily give customers the best deals once their individual circumstances are taken into account.  The auction bids are based on average consumption levels and SSE would be concerned that customers could potentially end up switching to a worse deal, even if that is clearly not the intention.

Please be assured that SSE would like to work with Which? and other parties in creating a collective switching process that works fairly and effectively for all customers. If solutions to the issues we have identified can be found, we would be very happy to participate in the future.  This means we would prefer to spend the time now getting the collective switching process right, so that it can be replicated in future to the benefit of competition and customers.

We think that a more positive customer experience would arise if the time was taken to understand the key features that are of interest to a particular group of customers, and then identify the most appropriate offer type.  It would be on this basis that customers could then choose to collectively switch.  For example, SSE's EBICO partnership is a product offering, where all customers pay the same unit rate, regardless of payment method and is tailored round EBICO's not for profit credentials. 

In summary, SSE supports initiatives designed to help customers get the best deal from the energy market – that is what lies behind our Building Trust commitments, which are ongoing.  There are, however, too many difficulties with the Big Switch as it currently stands to enable SSE to participate.

In view of the interest in the Big Switch, and in order to keep our customers informed about our position with regard to it, this letter will be shared with other stakeholders and made available to customers via our website.

Yours sincerely,

Alistair Phillips-Davies
Generation and Supply Director