18 Suppliers agree to pay £10.4 million redress for price protection failings
Decision
- Publication date
- Company
- E (Gas and Electricity) Limited Utility Warehouse Octopus Energy Limited npower Bristol Energy Limited OVO Energy Limited Shell Energy Retail Limited British Gas Trading Limited ScottishPower Energy Retail Limited EDF Energy Plc ENGIE Power Limited ESB Energy Limited Orbit Energy Limited PFP Energy Limited SSE Energy Limited
- Industry sector
- Supply and Retail Market
- Licence type
- Electricity Supply Licence
- Gas Supplier Licence
Ofgem has concluded compliance engagement with 18 suppliers in relation to their adherence to the price protection rules which should protect customers’ tariff prices when they decide to either switch suppliers or tariffs after a price increase.
In total, over 1 million customers were overcharged over £7.2 million with detriment of up to hundreds of pounds for some of those customers.
There are three main groups of affected customers, as follows:
- Customers on a Standard Variable Tariff who switched to another supplier but did not have their variable tariff price protected during the switch to another supplier (SLC 23.6).
- Customers on a Fixed Term Tariff who switched to another supplier but did not have their fixed term tariff protected during the switch (SLC 24.9).
- Customers on a Fixed Term Tariff who moved to another tariff (with their supplier) but did not have their fixed term tariff protected during the switch (SLC 24.11).
Although the reasons for non-compliance were varied, most suppliers had not put adequate arrangements in place to make sure the protections were applied in full.
Ofgem takes compliance with these rules very seriously. It is important that customers’ tariffs are protected while either switching suppliers or tariffs. We remind suppliers that it is important that they ensure their systems, processes and practices are compliant with all regulatory requirements even when these only apply to a specific set of customers or only apply in specific circumstances.
Ofgem expects all suppliers to ensure that they comply with these requirements. Ofgem considers that that this alternative action will act as a deterrent to future non-compliance. Where further non-compliance is identified, Ofgem will strongly consider taking formal action in accordance with our Enforcement Guidelines.
Key messages to suppliers
- It is important that suppliers clearly understand the Standard Licence Conditions (SLC) and that they ensure their systems implement the price protection while customers switch suppliers or tariffs.
- Ofgem expects suppliers to have robust governance and risk management processes in place with the ability to identify and mitigate the risk of consumer detriment.
- Ofgem encourages and expects suppliers to self-report any possible non-compliance or customer detriment as a matter of good practice.
- Ofgem is aware that some of the suppliers struggled to supply data in a timely manner. Our expectation is that suppliers keep diligent records of their billing activity so that any non-compliance can be addressed expediently.
- Each of the 18 suppliers provided initial redress packages in line with their own goodwill policies. In some cases these packages were generous and further compliance engagement was not necessary. Where there was repeated non-compliance or other serious conduct (e.g. when overall detriment was very high), we worked with suppliers to secure higher packages of redress for consumers.
- Although Ofgem has used a compliance approach in these cases, we are more likely to open an enforcement case if there are repeated non-compliances in the future.
Redress Packages
In all cases we ensured that the non-compliant practices were resolved and that customers who were overcharged were notified and received redress where possible. The redress packages from all suppliers involved are set out below. Some suppliers have already paid the money back to customers in full, and others are in the process of doing so. In many cases, additional goodwill has been awarded to customers. Where it has not been possible to process redress in specific cases, for example where individual customer detriment was very low, or where suppliers have not acted swiftly enough, the suppliers involved have agreed to make payments to the Energy Industry Voluntary Redress Scheme. Ofgem will continue to engage with suppliers ensuring that the redress packages are progressed in full. In the case of suppliers who are no longer trading, we will continue to engage with the new Supplier, Administrators, or Suppliers of Last Resort as necessary.