20 Suppliers correct 2019/20 Fuel Mix Disclosure (FMD) statements, after overstating the proportion of renewable electricity supplied to their customers
Decision
- Publication date
- Industry sector
- Supply and Retail Market
- Scheme name
- REGO
Summary of findings
Earlier this year, Ofgem carried out a market-wide review of suppliers’ 2019/20 Fuel Mix Disclosure (FMD) statements. This led to compliance engagement with 20 domestic and non-domestic suppliers during summer 2021, in relation to Supplier Licence Condition (SLC) 21. The suppliers we engaged with had included an overstated proportion of renewable electricity in their FMD statements.
Across the market, we found that suppliers reported to have supplied a total of 2,151,820MWh more electricity from renewable sources than was supported by their evidence. This was due to a total of 2,151,820 Renewable Energy Guarantee of Origin (REGO) and Guarantee of Origin (GoO) certificates not being held by suppliers on 1 July 2020. Eleven suppliers that were identified to have held insufficient REGOs and/or GoOs for their 2019/20 FMD statements agreed to surrender REGOs equivalent to their FMD discrepancy, as a proportionate reflection of their non-compliance.
Eighteen suppliers agreed to pay a total of £90,000 into the Energy Industry Voluntary Redress Scheme (VRF) in recognition of non-compliance with SLC 21.
It is important that suppliers provide accurate information to consumers on renewable electricity supplied, as part of their FMD statements.
We identified some common issues of non-compliance with SLC 21 which led to overstating the renewables contribution in FMD statements. These include:
- Errors in the calculation of the Total Amount of Electricity supplied to customers, leading to suppliers holding insufficient REGO and/or GoO certificates to support the proportion of electricity reported to be from renewable sources. This included failure to apply the line loss factor as part of the calculation.
- Administrative errors resulting in REGO certificates not being held in the correct account on the Renewables & CHP Register on 1 July 2020, which meant that these certificates couldn’t be used for FMD purposes.
- Suppliers who did not intend to purchase REGOs and/or GoOs incorrectly using the UK Average Fuel Mix figures, instead of Residual Fuel Mix figures, as their FMD statement.
Reasons behind the review
One of Ofgem’s key priorities is to facilitate the most effective path to decarbonisation and net zero at the lowest cost to consumers, as outlined in our Forward Work Programme 2021/22. Within this transitioning retail market, an increasing number of suppliers state that they supply renewable electricity to their customers. It is crucial that consumers are given accurate and transparent information about the energy they consume, so that they can make informed choices about their energy supply. FMD statements play an important role in enabling this, and it is imperative that consumers are accurately informed of the proportion of renewable electricity supplied, as stated in a supplier’s FMD statement.
Key messages for suppliers
- Ensuring that consumers can rely on suppliers’ information about their fuel mix remains a priority for us. We expect all suppliers to comply with SLC 21 and will not look favourably on future non-compliance in this area.
- All suppliers should ensure that an accurate FMD statement is readily available to consumers. The information should be presented in a clear manner that ensures ease of understanding and labelled with the disclosure period the FMD statement applies to, for example, 2020/21 for the current disclosure period.
- The Department for Business, Energy and Industrial Strategy (BEIS) has recently conducted a Call for Evidence on how a more transparent framework can be developed for communicating the carbon content of energy products to consumers. This may result in changes to SLCs and requirements in the future. In the meantime, we intend to continue to review suppliers’ compliance with SLC 21 under the current framework. We are also likely to engage with suppliers if and when any new framework is put into place, in order to verify compliance.
Actions taken by suppliers
Suppliers who provided 2019/20 FMD statements to consumers, overstating the proportion of renewable electricity, agreed to take the following actions*:
- Suppliers with insufficient REGOs and/or GoOs to support the proportion of renewable electricity stated in their FMD statements have agreed to surrender REGOs equivalent to the discrepancy, without using them for any FMD disclosure periods. This is a proportionate approach, with the value relative to the size of the discrepancy. These REGOs cannot be used to make suppliers’ 2019/20 FMD statements retroactively compliant.
- Where Ofgem considered consumers were likely to be particularly impacted, suppliers have agreed to communicate with affected customers, informing them of inaccuracies in the supplier’s published FMD statement and offering customers a switch with no exit fee to another supplier.
- Pay a nominal sum of £5,000 into the VRF** in recognition of non-compliance with SLC 21. This includes suppliers who provided consumers with the UK Average Fuel Mix instead of the Residual Fuel Mix.
- Update their FMD statements to reflect the correct proportion of renewable electricity, based on the evidence held on 1 July 2020.
Suppliers that were yet to provide their 2019/20 FMD statement to consumers in accordance with SLC21.3 were reminded of the requirements to provide the FMD statement prior to 1 October 2021.
*Suppliers that ceased trading after compliance engagement was concluded had already completed the relevant actions listed above before exiting the market. A small number of suppliers that ceased trading during our engagement had corrected their FMD statements but had not completed some of the other actions.
**With the exception of suppliers where the payment would exceed 10% of turnover, in line with our Statement of Policy with respect to Financial Penalties and Consumer Redress.
The specific actions taken by individual suppliers depended on the nature of their non-compliance. We have set out the area of non-compliance for each of the suppliers we have engaged with below:
Suppliers who held insufficient REGOs and/or GoOs to support the proportion of renewable electricity they reported to supply (including suppliers who omitted to apply the line loss factor within their calculation):
Suppliers who incorrectly used the UK Average Fuel Mix for their FMD statement, overstating the proportion of renewable electricity supplied:
Technical Information on Fuel Mix Disclosure
Background
The purpose of FMD statements is for each supplier to communicate the proportion of each fuel source that contributed towards the electricity supplied to customers during each 12 month disclosure period. A disclosure period runs from 1 April to the following 31 March.
Suppliers can purchase certificates known as REGOs and GoOs. Each REGO and GoO certificate represents the equivalent of 1MWh of renewable electricity. These certificates are used as evidence for the proportion of renewable electricity stated in a supplier’s FMD statement.
This section highlights some key areas we have identified, where suppliers fell short of expectations and requirements. It remains the responsibility of suppliers to comply with SLC 21 and associated guidance.
Provision of FMD Statements
SLC 21.3 requires suppliers to provide customers with an FMD statement in a bill or statement at least once during a period of 12 months, from 1 October following the end of the disclosure period in question and to include it in promotional material issued during that same 12 month period.
Although SLC 21 does not require suppliers to publish their FMD statement on their websites, if a supplier does choose to do so, it must be accurate.
Evidence of Renewable Electricity Supply
For REGOs and GoOs to be counted towards a supplier’s FMD statement, SLC 21.10 requires the REGOs and GoOs to be held by the supplier on 1 July following the end of the relevant disclosure period. The electricity the REGO or GoO was issued against must have been produced during the disclosure period in question. It is not possible for suppliers to acquire REGOs and GoOs beyond this deadline of 1 July to retroactively become compliant for the purpose of their FMD statements.
Under FMD guidance issued by Ofgem, REGOs need to be held in the relevant Supplier account on the Renewables & CHP Register at midday on 1July in the relevant year, in order to be redeemed for FMD purposes. REGOs held in Generator or Participant accounts on this date cannot be redeemed by Ofgem and, accordingly, do not count towards the FMD statement. The transfer of REGOs into a supplier’s account must be ‘accepted’; those ‘pending transfer’ at midday on 1 July also cannot be redeemed. It is the responsibility of suppliers to ensure that REGOs they wish to be redeemed for FMD purposes are held in their Supplier account by midday on 1July.
Total Amount of Electricity
Suppliers must use their RO supply volumes as the starting point for the calculation of the Total Amount of Electricity, as defined in SLC 21.15.
We expect any Energy Intensive Industry exempt electricity supply that is removed from supply volumes for RO/FIT purposes, to be included in the Total Amount of Electricity calculation for FMD purposes.
Line Loss Factor
For each disclosure period, BEIS publishes a transmission and distribution loss factor to be applied to suppliers’ supply volumes to calculate their Total Amount of Electricity, as defined in SLC 21.15. The line loss factor accounts for electricity lost within the transmission and distribution network. The line loss factor must be applied to all supply, with the exception of any electricity supplied from embedded generation.
Please note, a line loss factor must not be applied when reporting supply volumes for the purposes of the Renewables Obligation (RO) and Feed-in Tariff (FIT) schemes. For those schemes, suppliers should continue to follow the recommended supply volume methodology set out in Appendix 5 of our RO Guidance for Suppliers.
Residual Fuel Mix
For each disclosure period, BEIS publishes the Fuel Mix Disclosure Data Table containing the Residual Fuel Mix figures, which reflect the mix of fuel sources remaining once all evidence held by suppliers has been accounted for. If a supplier does not hold sufficient REGOs, GoOs, generator declarations or other relevant evidence for any part of the electricity purchased for supply during the relevant disclosure period, they must apportion the Residual Fuel Mix figures to that supply. If a supplier does not hold any evidence for their purchased supply, they must use the Residual Fuel Mix figures as their FMD statement and for the purposes of complying with SLC 21.3.
The UK Average Fuel Mix figures published by BEIS can only be used for comparison purposes.