HOMEflex seeks to address gaps in fairness during the development of domestic Flexibility Services. HOMEflex aims to create an inclusive, fair, and transparent marketplace from the start. It will achieve this by developing a Code of Practice for Domestic Flexibility Services, including a framework and business case for an accompanying Compliance Scheme.
If successful, HOMEflex could be used by procurers of Flexibility Services to give them the confidence they are engaging with a trustworthy vendor and by flexibility providers to demonstrate their credibility. HOMEflex draws on previous findings including Flex Assure for industrial and commercial customers, “Smart and Fair?” and CrowdFlex. This proposal resulted from engagement with Open Networks members and is seen as important for delivering domestic and microbusiness flexibility fairly.
Benefits
The ultimate benefit of this project will be the development of an inclusive, healthy, publicly trusted and liquid domestic Flexibility Services marketplace. The project is not dedicated to a specific, single financial benefit to the customer, but rather a better customer experience throughout the whole cycle of a customer’s engagement with a Flexibility Services provider, the avoidance of customer detriment and unrealised income, and facilitation of better understanding of offers and a clear thread of accountability across a potential stack of service delivery partners.
Learnings
Outcomes
The research conducted by the Centre for Sustainable Energy had two main objectives:
1) Assess the extent that the draft Code of Conduct addresses consumer concerns about energy flexibility services.
2) Elicit suggestions for improving the draft Code of Conduct that can be used by the HOMEflex team as they prepare the final version of the Code.
Having now completed the research, we can analyse the findings and draft the HOMEflex code of conduct to cover as many domestic consumers concerns as possible, in the hope to increase the participation in flexibility service offerings.
The main findings of the first section of the research highlighted the importance of education for domestic consumers, in particular around the technicalities of flexibility service offerings, how they can benefit the energy system and how to make comparisons between the flexibility service offerings consumers are seeing and receiving.
Sales and Marketing Participants were positive about the draft Code of Conduct statements shared around Sales and Marketing and said they were a ‘great starting point’. Most comments on this heading focused on clarity of financial reward. Participants wanted financial information to be tailored to specific household circumstances, to indicate timeframes of benefits and to acknowledge any relevant uncertainties in forecasting. Other comments included specifying geographic limits of service provision and measures to facilitate comparison. Overall, low confidence groups shared fewer views on Sales and Marketing.
Contracts and Terms and Conditions Participants felt that the draft Code of Conduct addressed a comprehensive range of contractual areas and issues. A key theme of discussion around this heading was making sure Terms and Conditions are concise and easy-to-read. Several participants shared that they did not normally read Terms and Conditions. Some specific suggestions were raised for maximising the accessibility of any Terms and Conditions and bringing them forward in the consumer’s decision-making process. One participant felt there was a role for accreditation to play in scrutinising Terms and Conditions so that consumers could have confidence in them. Other key areas of discussion included transparency on financial elements, clarity around insurance and guidelines around what happens in case of supplier insolvency.
Technical Due Diligence, Data and Cyber Security Participants from low income and low confidence groups shared the most comments about technologies. They were keen that any technologies or services were properly explained and, where possible, standardised in terms of warranties and compatibility. Most participants were happy with flexibility services to simply comply with existing data and cyber security regulations. Several participants felt that they wanted providers to provide some insight on their energy data: for example, providing tips for maximising savings.
Complaints and Redress Participants in all groups cited the need for an independent body (an ombudsman or regulator) to deal with complaints and redress and enforce standards. This was deemed especially important for services involving multiple providers. This would enable confidence that if an energy supplier was not taking it seriously enough or not doing what the consumer feels they should, there is an option to take the issue to an independent entity. Insolvency was a concern raised by three participant groups. Participants wanted regulation to protect them in case of a potential break-in service, for example a requirement for providers to have a back-up plan for service provision if they cease trading. They also wanted regulation to take account of whether providers have a history of insolvency. Participants shared some general thoughts around best practice in terms of effective complaint and redress procedures.
Ethical Considerations Participants shared some specific feedback on the draft guidelines around Ethical Considerations. Participants requested more clarity around: how the ability to manage financial risk was measured, which customer vulnerabilities are included in consideration, and what constitutes inclusive design. Generally, participants were reassured that the Code of Conduct encompassed thinking about equity and fairness and agreed on the principle that services needed to be recommended to suitable consumers. One participant suggested that the right to switch from a long contract, especially for vulnerable consumers, could be included in Ethical Considerations.
Following the completion of the HOMEflex Code of Conduct, we will put the Code out to Open Consultation at the end of Summer 2023 for any changes to be proposed prior to the Code completion in the Autumn. It is intended to hold a small launch event in London at that time.
Lessons Learnt
The introduction of National Grids DFS service in the winter of 2022/23 has shown the wide range of different commercial models that are possible in a domestic flexibility marketplace, including new entrant flexibility service providers that have no existing business with a customer and only gain access to the customers smart meter data to offer the service. It is certain that additional models will also develop as the marketplace becomes more fluid and attractive. However, without some clear understanding of the structures of this wide range of business models there is a risk that any standards, codes or regulation may restrict or limit valuable, future innovation. It would therefore be wise for future projects in this area to consider including an additional research component to study and better understand the range of business models that are already available or being considered by innovative businesses.
The Flex Assure Team have been in close consultation with Government departments due to their consideration of future, potential regulation of the domestic flexibility market. Fortunately, Flex Assure and the ADE already had very close links with the relevant teams within DESNZ (formally BEIS) and Ofgem, so have been working in collaboration on the development of the HOMEflex Code and their consideration of future regulation. It would be vital for any future work in this area to be closely aligned with the relevant Government departments to assure that no overlap, contradiction or incompatibility occurs. Before any future project is approved and commences, close liaison with Government is essential.
