Greg Jackson outlines his vision and ethos Years of being a customer of one of the Big Six energy suppliers left me frustrated at the lack of innovation – sky-high prices, appalling customer service and true green energy seemed an unreachable dream in a stagnant, bloated market where consumer rights were being trampled on.
I started thinking about what a modern energy supplier would look like – one that offered only fair, transparent and affordable tariffs, exceeded customer expectations (which were admittedly pretty low at that time), and had sustainability at its heart, creating a clean energy future for the UK.
I was working in an e-commerce start-up at the time, so I knew the technology existed to do things better, and I felt there was a massive opportunity for a supplier that was on the customer’s side. Having the idea for Octopus Energy was the first step in a long road.
We launched into a market not geared to doing the right thing for their customers; loyal customers being charged eye-wateringly high prices, unsustainably low pricing designed to hook new customers in and the prevailing business model was one that completely relied on customer apathy at switching – “they’re all as bad as each other”.
Our most critical tool was our commitment to fair and affordable prices that people could believe in. We add only about 5 per cent on top of the wholescale energy we supply to cover all our costs of doing business and profit.
In this day and age consumers expect total price transparency from the businesses they buy from. It astounded me that this open approach seemed to pass the energy sector by.
But then we looked a bit deeper, and saw a cynical pattern of “tease and squeeze” among many suppliers; tease customers in with unsustainably low prices, then squeeze them up the minute they can.
The tricks used to reel IN customers
We discovered that, according to the energy regulator Ofgem, two-thirds of suppliers were cross-subsidising cheap fixed tariffs to lure in new customers. Our data team compiled data on the cheapest fixed-term deals versus standard variable tariffs (SVTs) from every energy supplier and price comparison websites and, working with BBC’s Moneybox, we released results that were absolutely staggering.
Six of the top 10 suppliers appearing in price comparison sites raised their prices by over 35 per cent when customers rolled off their initial fixed-term deal. For some, the increase in what they were paying from one month to another was over 50 per cent. And this also meant that in many cases customers would have been better off choosing suppliers lower down the list when they chose a new supplier in the first place – the more “expensive” single-year price, but better value over the long term.
We’re all told to switch but those who bravely take that plunge are exploited by the temptation of the cheapest option with no longer-term view. The true cost was anything but transparent.
So we made our feelings known on the matter. We worked with MPs John Penrose and Caroline Flint, sharing our tease-and-squeeze data to support their analysis of the energy market, and backed their proposals for an energy price cap to rein in the rip-off pricing that dominated this sector.
I was honoured to be called to give evidence twice before MPs on the Business, Energy and Industrial Strategy Select Committee to make the case for a cap, and was asked to help scrutinise legislation. In fact, we received seven mentions in Parliament and our phrase “Tease and Squeeze” was quoted 39 times as parliamentarians debated fairer pricing.
A positive outcome
The result was the introduction of the energy price cap, legislation passed into law in July this year.
This legislation will limit the price a supplier can charge customers who languish on their SVTs – more than 11 million households.
With Octopus, I’m delighted that we stand proud with nearly 400,000 customers, but I’m incredibly proud that we’ve played a part in something that will save all consumers, not just our customers, hundreds of millions of pounds per year.
On top of this, we know we have an important job to do in combating climate change. We supply only 100-per-cent renewable electricity to all of our customers, we’re developing new and innovative offers that help our customers manage their energy in a more sustainable way, and we’re helping our partners such as Arsenal football club blaze a trail in adopting a greener approach to their business.
We’re making great strides in this area, but I know there’s a lot more work to do as we strive for a clean energy future.