Small Businesses' Satisfaction and Engagement with the British Energy Market: The Role of Energy Brokers

Abstract

Householders’ satisfaction and engagement with the retail energy market has generated considerable debate, this paper provides the first academic assessment of the situation for micro and small business (MSB) energy customers. We find that, while energy brokers are central to MSBs switching energy supplier, the quantity of marketing contact received from them is a key source of dissatisfaction. This is of policy relevance since the Competition and Market Authority’s 2016 Energy Market Investigation recommended that a database of ‘disengaged’ MSBs be established to enable marketing communications from rival suppliers to prompt MSBs to switch. Our findings support both Ofgem’s decision not to take forward this recommendation and its proposals to provide increased regulatory oversight of intermediaries’ behaviour. We query the use of annual switching data to justify concerns around MSB engagement, given the prevalence of multi-year energy contracts among MSBs, which likely constrain the annual switching rate for MSBs . Overall, the paper exemplifies the types of insights that can be obtained from econometric analysis of the anonymised raw data within regulator-commissioned surveys. We recommend that UK regulators make such data public by default, to enhance the transparency, and potentially the quality, of their decision making.

Keywords: energy brokers; retail energy market; switching; customer satisfaction; small businesses; and consumer engagement

JEL Classification: D22, L50, L51, L94, L95, Q40