Decision of the Gas and Electricity Markets Authority to close its compliance engagement with Utilita on the requirements of condition 28A of its gas and electricity supply licences
Decision
- Publication date
- Industry sector
- Supply and Retail Market
Ofgem has investigated Utilita’s failure to comply with Standard Licence Condition 28A of the Gas and Electricity Supply Licences (SLC 28A), in relation to the Prepay price cap.
Under SLC 28A (the Prepay price cap) the licensee must ensure that the charges for the supply of electricity and/or gas to domestic customers do not exceed the amount specified under the Prepay price cap which is set for a 6-months charging period. Where the licensee offers multi-tier prepayment tariffs, the charges must not exceed the Prepay price cap either for all possible divisions of consumption between the different months within the charging period.
Utilita offers multi-tier tariffs for customers with SMETS and non-SMETS smart (NSS) meters. In order to be compliant within the Prepay price cap which became effective on 1 April 2017, Utilita was to reduce the usage thresholds of its multi-tier tariffs but mistakenly and due to a technical implementation error the usage thresholds were not changed at the same time as the new prices were implemented. This resulted in customers being charged a higher tier one unit rate for more units (ie the cheaper tier two unit rate kicked in later than envisioned) and therefore paying more than they should have under the Prepay price cap.
The issue affected 347,584 customers (around 329,000 SMETS and 18,000 NSS customers, or 535,100 SMETS and around 29,349 NSS meter points) – with a combined overcharge of around £3.54 million.
After becoming aware, Utilita self-reported the problem with its SMETS meters in April 2017 and the problem with its NSS meters in June 2017. In both cases, Utilita took swift action to correct for the wrong usage thresholds and to refund and compensate affected customers. In particular:
- For its SMETS meters, Utilita made the necessary threshold amendments to the affected meters in April 2017 to correct the boundaries between the unit rates. Utilita then started to refund 2.72 million, the bulk of the refunds were completed by the end of May 2017.
- For its NSS meters, Utilita created a new tariff which operated compliantly within the Prepay price cap, however, utilised the existing thresholds set within the meters. Utilita then started to refund and compensate adversely affected customers paying them a total of £890,000. This includes a compensation payment of £68,200 to NSS customers since the issue was unable to be resolved sooner, the bulk of the refunds were completed by October 2017.
Throughout the investigation period Utilita had been working closely with Ofgem. By 1 December, Utilita informed Ofgem that £3.58 million of the £3.61 million had been refunded. The remaining amounts are mostly vouchers not redeemed yet by customers.
We reviewed and are satisfied that Utilita has taken appropriate remedial action to address potential non-compliant activity and that affected customers had been appropriately compensated. In particular, Utilita made sure that they quickly notified Ofgem of the issue and the actions they planned to take to fix it and refund affected customers.
Utilita has worked to refund all affected customers, applying credits directly to meters where possible, and sent communications to customers advising them of the issue. As well as refunding customers, Utilita also compensated those customers who were most affected. Where Utilita was unable to apply credit directly to meters, vouchers were issued to customers and where these are not redeemed, will be provided to the Energy Savings Trust – Ofgem’s appointed fund that manages allocation of voluntary redress payments to charitable organisations.
Due to these actions, we have decided to close the compliance investigation without taking further action.