Energy regulator Ofgem has published the results of a new review into how energy suppliers help customers in payment difficulties and has found issues ranging from minor through to severe weaknesses or failings.
The deep dive found that, although good practice exists across the industry, with one supplier having no issues, most need to make improvements in processes and governance to meet their obligations. The majority of suppliers were found to have minor or moderate issues and three were found to have ‘severe’ weaknesses – of which two suppliers have been served with immediate enforcement notices.
Given the seriousness of these concerns, Ofgem has already issued Provisional Orders to Utilita and ScottishPower, requiring specific and urgent actions, and the regulator will also consider whether enforcement action is warranted for other suppliers.
What were the key findings from Ofgem’s review?
- One supplier, British Gas, was found to have no significant issues,
- Eight suppliers (Ecotricity, EDF, E.ON, Octopus, OVO, Shell, UW and SO Energy) were found to have ‘minor’ issues
- Five suppliers (E, Good, Green Energy, Outfox and Bulb) were found to have ‘moderate’ weaknesses,
- Three suppliers (TruEnergy, Utilita and ScottishPower) were found to demonstrate ‘severe’ weaknesses in the way they deal with customers having payment difficulties, with Utilita and ScottishPower being issued with enforcement notices.
What failings were found amongst energy suppliers?
Amongst the findings were companies with non-existent policy relating to customers in payment difficulties, a lack of management oversight in the quality of their customer engagement and a lack of adequate training materials.
Ofgem says that although energy suppliers have been facing demands of their own over the past year, “prioritising vulnerable customers struggling to pay their bills during this winter is critical”.
Amongst the failures were a lack of adequate training materials so staff can support customers – (e.g. customer service operators lacking relevant training in order to ascertain a customer’s vulnerability / circumstances) and a lack of clarity over how payment plans are reassessed if customers’ circumstances change .
Ofgem also found a lack of processes to identify thresholds for important payment plans and how suppliers ensure these are being set in a fair and consistent manner.
Ofgem also found unclear company governance, including escalation routes and levels of delegation and decision-making – meaning customer risks are left exposed.
As well as publishing the outcome of the review today, Ofgem has also sent a letter to all suppliers outlining the standards expected of them – as well as best practice information.
What has Ofgem ordered energy companies to do?
This current review has now identified areas for improvement across suppliers. This includes:
- proactively identifying customers in payment difficulty including those on prepayment who may have self-disconnected or are in danger of doing so, so that support can be offered.
- ensuring systems and processes are in place to efficiently and effectively identify, support and serve customers in payment difficulty.
- ensuring payment rates are set according to customers’ circumstances and ability to pay, ensure that this is regularly reviewed, and that debt is not aggressively pursued by the suppliers or third party it uses.
- repaying debt, for example through a prepayment meter, where in some circumstances these approaches are not appropriate for customers.
- ensuring the appropriate provision of emergency credit and Additional Support Credit to prepayment customers.
- improving signposting third party specialists help to customers.
Is this the first time Ofgem has issued enforcement orders against energy companies?
No. The latest review, designed to help customers struggling with bills, is the second deep dive of supplier behaviour by Ofgem, in a series of market reviews looking to improve sector practice and customer service.
The first review examined supplier behaviour with regard to direct debits and found failings in 12 suppliers, one of whom (TruEnergy) was served an enforcement order. Since that review, significant improvements have been made and led to TruEnergy being obliged to commission an independent audit to assess whether its direct debit policies and processes are compliant with its regulatory requirements.
Jonathan Brearley, Ofgem CEO, said: “This winter will be challenging, especially for those struggling to pay their energy bills. Although the government’s package of support will provide some welcome relief, it’s critical that, going into this tough winter, energy companies prioritise the needs of vulnerable customers struggling to pay their bills.
“We have reviewed suppliers on how they help customers who are having trouble paying their bills, particularly those who are vulnerable, and found some suppliers have fallen short of the standards Ofgem expects. We accept that there are many pressures on energy companies in the market this Winter, but the needs of vulnerable customers must be part of their top priorities. We will now work with companies on where they can improve, and I all urge all suppliers to step up to the challenge.”
Dame Clare Moriarty, Chief Executive of Citizens Advice, said: “Today’s review cements what struggling customers already know: some energy companies are falling drastically short of the mark. This is utterly unacceptable given the huge cost-of-living pressures people are facing.
“Suppliers need to up their game and Ofgem needs to hold them to task. With a tough winter ahead we must also see a ban on backdoor disconnection tactics like pushing people in debt onto prepayment meters.”