Energy suppliers ordered to review 500,000 increases in customer levies
Half a million energy customers have seen their domiciliation increase by more than 100% with the surge in gas prices in recent months. The regulator has now ordered providers to review the amounts.
As gas prices have exploded, offtakes from energy customers have also seen sharp increases.
Following concerns they have been raised to unfair and/or unmanageable levels, the energy regulator, Ofgem, has conducted a review of 17 of the largest energy providers in the market.
He found a “range of weaknesses or failings in the way they charge direct debits from customers” and ordered a number to take “immediate and urgent action”.
Ofgem said that although it did not find evidence of unjustified direct debits, it ordered all suppliers who increased direct debits by more than 100% between February 1 and April 30, 2022 to review them. . This impacts 8% of standard variable rate (SVT) customers, i.e. more than 500,000 bill payers.
He said he was “concerned about this and wants to make sure there is a good reason for this, for example an SVT stopping or an increase in energy consumption”.
Ofgem added that, where appropriate, suppliers should adjust any miscalculations, including making refunds where necessary, and determining whether a goodwill payment is warranted.
The regulator also noted that more than seven million energy customers on SVT saw their offtake increase between February and April 2022.
On average, offtake levels for SVT customers increased by 62%, the majority of which reflects the increased cost of gas.
He also found that some vendors’ processes “are not as robust as they could be, and this could lead to inconsistent, incorrect, or poor treatment of customers.”
In addition, he also said that there was “a lack of formally documented policies and processes at some vendors, which risks inconsistent and poor results for consumers.”
Energy supplier domiciliation reports
Ofgem has divided the supplier findings into three groups:
No significant issues: British Gas, EDF, Scottish Power and SO Energy. He said these vendors generally had “robust processes in place”, although he made some recommendations for improvement. They have been asked to review customer direct debits to ensure they are correct.
Minor weaknesses: Bulb, E.ON, Octopus Energy, Outfox the Market, Ovo, Shell and Utility Warehouse had flaws in their processes that “could lead to poor outcomes for consumers”. Examples include the lack of documented policies or guidance for staff, the potential consideration of all relevant factors when setting up customer direct debits, or the risks that certain customer direct debits will not be assessed. if applicable. It said it has entered into a “compliance engagement” with those vendors to seek improvements.
Moderate to severe weaknesses: Ecotricity, Good Energy, Green Energy UK and Utilita Energy had a “range of weaknesses”, ranging from insufficiently documented or integrated processes, weak governance and controls, to a general lack of a structured approach to defining direct debits from customers.
She expressed concern that in some cases this could lead to customers’ direct debits being poorly defined or not being assessed for a long period of time. This can result in the accumulation of unnecessarily large credit or debt balances, depending on whether the customer pays too much or too little. Ofgem enters into a compliance engagement with these suppliers and where improvements are not made it will consider enforcement action.
TruEnergy and UK Energy Incubator Hub (UKEIH) were also placed in this group because they “did not have a consistent and structured approach to establishing direct debits from customers”, and Ofgem found “serious concerns about the maturity of their processes, putting consumers at serious risk of inconsistent or poor results, requiring rapid and significant improvement.” It is examining whether enforcement action is warranted, but since the findings were issued UKEIH has stopped trading and Ofgem has therefore stated that it will not pursue any further action against it.
“Crucial Direct Levies Are Right”
The findings come after Ofgem set out plans to help prevent supplier default and better protect customer cash in the event of business collapse. It has also sought to strengthen direct debit payment rules to help prevent excessive credit balance buildup.
Jonathan Brearley, CEO of Ofgem, said: “We know how difficult it is for energy customers at the moment, so it’s crucial that the amount they pay each month in direct debits is correct. so they can manage their money.
“Suppliers must do all they can, especially during the current gas crisis, to support customers and recognize the significant concerns and concerns that increased direct debits may 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 findings show that with the urgent changes we expect, the current system will be much fairer for consumers. Falling gas prices are not under Ofgem’s control; however, we will do our best to have a fair system and ensure that suppliers look after their customers.
The energy price cap increased on April 1, 2022 – a 54% increase bringing average energy bills to almost £2,000. However, average energy bills are expected to reach £3,363 in the first quarter of 2023.