Free market. Involve the consumer in the choice process

by Luca RIZZI – Commercial Director of Audax Energia Italia

In July 2020 - a year later than had been expected - the electricity market will open up completely to free competition, putting an end to what is defined as "greater protection" and the long transitional phase that began in 2007 (in 2003 for gas).

A first consequence is that Italians - at least those who have not yet done so - will have to choose which operator to turn to for the supply of electricity and gas. A second is that they will have to orient themselves among a multiplicity of offers and tariffs that are diversified between them. A third is that, from this finally free market, the consumer will be able to derive advantages in terms of cost and/or service.

But where are we with the liberalization process? With what level of awareness do consumers prepare to choose between the various operators present in Italy today?

From 2007 to today, the number of users who have left the protected market has continuously grown. A decision taken, in 2017 alone, by 1.5 million domestic customers and 300 thousand customers defined as "other uses" (for example small businesses). Furthermore, according to 2018 data provided by the Authority (Arera) and referring to electricity, the 46% of families (13.3 million users) and the 58% of SMEs (4.3 million) have now moved to the free market, choosing among the sales companies operating in Italy. These, in the last twelve months, have risen to 554 compared to 507 in 2017.

As regards gas (data updated to 2017), however, the 44% for domestic users and the 52% for condominium users have definitively abandoned protection.

These are numbers that demonstrate that change is underway and is indisputable, regardless of the slowness with which it proceeds.

What is still a long way off, however, is the average user's knowledge of market liberalization and the impacts it may have on energy consumption habits. A recent and interesting study promoted by the Authority and carried out by the Research Hub institute has taken the picture of the situation [+info].

The survey, conducted on a sample of 3,000 users, highlighted that almost half of those interviewed (48%) do not know what it means or what being in a competition regime entails. And not only that, considering that the vast majority of them don't even feel the urgency to find out; according to the data, in the last 3 months, only 18% of users have taken information on the free market or its operators. And this despite the succession - practically weekly - of news on the high bill.

The 46% then declares that he "gets on well" with the current provider - or at least that he maintains a "neutral" position (42%) - so much so that he intends to faithfully continue the relationship even when he switches to the free market (60%) . A judgment which, however, is not always based on real knowledge of the conditions of the service, given that 70% of those interviewed state that they do not know what the cost components of the electricity bill are...

This loyalty to old suppliers is not that surprising and can be traced back partly to the perception of a service considered satisfactory, partly to other reasons that are always present when it comes to looking at the new: the force of habit and the fear of new features from change. The main motivations of those who responded to the survey concern in fact the worry of having negative experiences (15%), the lack of trust in operators (6,4%), the fear of the real quality of the service (9%) and the lack of clarity on the advantages of the switch (14%).

And this resistance to change, to which the aforementioned concerns contribute, is also combined with a certain "laziness" in dedicating time to the issue. The Arera data referring to 2017 seem to confirm this trend: the 68% of those who switched to the free market (domestic sector) did so by choosing "historical suppliers", i.e. the seller connected to the distribution company.

Strictly linked to this dynamic is, precisely, the issue of information. The Internet remains the primary source (54%), followed by other channels such as - for example - conversations with friends or relatives (33.8%), by traditional media such as radio or TV (30.6%) or by the call centers of sales companies energy (24,3%). Yet, despite the web being indicated first, comparison portals are still little or under used: only 19% of those who have changed operator have consulted one of these platforms. This is also valid for the official Arera portal, visited by very few.

Certainly age matters. And the 20-40 year old user group is the most inclined and proactive in consulting the network and digital tools when changing supplier.

A trend that clearly emerges from a recent survey carried out by Bain&Company and Google on the impacts of digital on energy. It highlights another element: price is not the only evaluation criterion in the final choice, especially when faced with more conscious and informed behaviours. While remaining at the top of the list, fare is not the only deciding factor; the presence of services and products connected to the simple sale of energy (whether additional, technological or smart, green or facility management services or products) increasingly contributes to the signing of the contract.

Therefore, almost a year after complete liberalization, the real work of operators in the sector - sales companies first and foremost - must be directed towards greater involvement of consumers in order to increase their awareness, but also to stimulate their curiosity and desire to inform themselves and go into detail.

The target? Remove distrust and fear towards new things and change.