The Annual Energy Statement is sent out once a year by energy providers to consumers. The reason for the statement is to give consumers the information that they need to better understand their energy spend so that they can better manage their consumption and take advantage of competition in the market. Unfortunately, the Annual Energy Statement can be a source of confusion for consumers. Here are some of the main areas of confusion.

Lack of Clarity

First, consumers may believe that the Annual Energy Statement is actually a bill. Annual Energy Statements have only been required since 2010 so many consumers are still being trained. They may be conditioned to expect every envelope that they receive from their energy providers to contain a demand for money, or perhaps another piece of bad news, such as projected rise in the tariff, or even a planned outage due to maintenance or repair.

Energy providers are addressing this concern with clear language.  Bills need to be marked as bills, and Annual Energy Statements as Annual Statements.  The Annual Energy Statement may need to include the explicit language, “This is not a bill.” Annual Energy Statement

Language

Second, some of the language can be confusing, especially as many words are used interchangeably.  “Package” and “price” and “deal” have all been used to refer to “tariff.”  The word “tariff” is still most commonly used with respect to energy, but the other words are occasionally employed and cause consumers to wonder if the word “deal” means something slightly different.  The solution is to stick with the word tariff, even though it may be repetitive.

Third, the names of the different tariffs are also problematic.  Too many of the names are similar to each other, making the tariffs difficult to distinguish.  Moreover, the various energy providers are currently offering a total of about 900 different tariffs, increasing the confusion.  The industry is consulting with Ofgem and others on methods for simplifying names of tariffs and what they represent.  However, simplification will have a cost: by reducing the number of and types tariffs available to consumers, competition may be reduced.

Numerically Challenging

Fourth, numbers are simply difficult for many consumers.  This problem is encountered in many other areas than just Annual Energy Statements, so recommendations for dealing with it already exist. Long numbers with decimals should be avoided if possible. Percentages can be used, but not too much.  It is best to use figures and terms that consumers encounter in other areas of their lives.

Fifth, some consumers may be uncomfortable with technical terms.  Kilowatt hour (kWh) is so common to those in the energy industry that they may not realize how intimidating it appears to many consumers.  Simple explanations can help, as can graphs. Converting an amount to what it means in pounds and pence – or dollars and cents – can also reduce confusion.

Improvements are Coming

Despite these challenges, most energy providers are working hard to make the statements more user-friendly.  Energy providers realize that the Annual Energy Statement is a chance to improve and to deepen their relationship with their customers.  They also realize that this is the time and place where it is important to seem as helpful and considerate as possible.  This is because one of the items that must be put into each Annual Energy Statement is a clear and obvious reminder that consumers have the right to switch energy providers.  Although energy providers will make this statement because they are required to do so, they generally do not want to lose their customers to the competition.

A final problem with the Annual Energy Statement is that consumers may not even open them.  This obstacle is difficult to overcome and is not unique to the energy industry. Some consumers do not open all the mail that they receive from their banks, so it is not clear how to get them to open all the mail coming from their energy providers.  Printing “Annual Energy Statement” on the outside envelope may help, but consumers may still chuck them in the bin.  Explaining on the envelope that the Annual Energy Statement may help them save money may induce the consumer to open the envelope and to study the contents.  On the other hand, this may cause the consumer to dismiss it as advertising and to throw it away.

Consumers have an opportunity to benefit significantly from their Annual Energy Statement, but only if they open them and understand them.  Energy providers are likewise striving to make these communications clear and meaningful.  They are a learning experience for everyone.

Laura Ginn knows that not many consumers understand the importance of their annual energy statement. She suggests that people visit uSwitch.com and check out their free information guides to help them to understand everything they need to know.

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