UK regulator Ofgem threatens to take action over inadequate payment policies

UK energy regulator Ofgem has asked power utilities to “take immediate and urgent action” to correct customer payment terms.

As part of a review, the regulator looked at companies’ procedures for setting up direct debits. A statement from Ofgem said it had “found a series of weaknesses or failures” in the company’s processes, including a lack of policy documents and guidance from staff on the handling of direct debits.

The most serious policy weaknesses included “poorly documented or integrated processes, weak governance and controls, [and] an overall absence of a structured approach for setting up customer direct debits”. Although Ofgem did not detail specific supplier failures, the regulator has categorized its 17 largest suppliers into groups, with only four finding no significant issues.

Of the 17 largest providers in the UK market, most had minor issues with payment systems. The regulator found Ecotricity, Good Energy, Green Energy UK, Utilita Energy and TruEnergy to have “moderate to severe weaknesses”. Ofgem has now “commenced a compliance engagement” with these companies, warning that continued non-compliance will result in fines or bans on acquiring new customers.

Ofgem CEO Jonathan Brearley said: “Suppliers must do all they can, particularly during the current gas crisis, to support customers and recognize the significant concerns and concerns that rising direct drawdowns can cause.

“We know there are great services out there, but we want to make sure they’re consistent and standard across the board. It is clear from today’s direct debit findings that there are areas of the market where customers are simply not getting the service they need and are rightly waiting during these very difficult times. .

“Today’s results show that with the urgent changes we expect, the current system will be much fairer for consumers.”

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All energy suppliers must now review the accounts of customers whose payments more than doubled between February and April 2022, or more than 500,000 in total. Utilities must submit action plans outlining how they will address these customers within two weeks.

The review also found that electricity supplier UK Energy Incubator Hub (UKEIH) also had significant shortcomings in its management. However, the company declared bankruptcy on Monday, two days before Ofgem’s announcement. The utility supplied electricity to 3,000 customers through the Northumbria Energy and Neo Energy brands. Ofgem will now transfer these customers to Octopus Energy, which won the tender for the customer accounts.

Four days earlier, Ofgem had asked the UKEIH to remove “a senior official from a position of significant managerial responsibility” after finding that “the individual was not fit and suitable for such a role”. The request marked the first time that Ofgem exercised power it acquired in January 2021. It was also followed following the failure of 28 energy suppliers since August 2021, which drew criticism from politicians according to which the regulator has not sufficiently exercised its power.

Also this week, charity co-ordinator Citizens Advice published a report covering the continuing stream of meltdowns across Britain’s public services. That said, the cost to Ofgem of transferring customers from failing suppliers has reached $5.47bn (£4.6bn). However, this calculation probably does not include the cost of UKEIH’s bankruptcy. These costs will add around $195 (£164) to the annual bills of UK households, which pay Ofgem.

Under the current system, electricity bills in the UK will rise to £1,971 in October. This represents a 42% increase in tariff caps six months earlier, pushing the poorest households into poverty.

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Elaine R. Knight