Britain’s energy regulator has told a string of suppliers to take urgent action after discovering “serious weaknesses” in the handling of direct debits to customers.
Ofgem has scrutinized how energy companies handle direct debits, finding evidence that customers were treated badly.
It named a group of suppliers where it had identified “moderate to severe weaknesses” – Ecotricity, Good Energy, Green Energy UK, TruEnergy, Utilita Energy and UK Energy Incubator Hub, which has ceased trading.
The regulator said it had found failings ranging from “inadequately documented or embedded processes, weak management and control, to an overall lack of a structured approach to determining direct debits to customers”.
Ofgem is concerned that these issues could lead to wrongly set direct debits or an irregular review, which could cause large credit balances or debt to build up, depending on whether the customer is underpaying or overpaying.
It has threatened to take action – which could include fines or a ban on acquiring new customers – if it does not see “rapid and significant improvement” from the companies.
Business secretary Kwasi Kwarteng said: “If we don’t see improvement within two weeks, the regulator can issue fines and enforcement orders.”
The findings come as consumers struggle with rising household bills, which are expected to hit £3,000 a year this winter.
Ofgem chief executive, Jonathan Brearley, 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 right so they can manage their money .
“Suppliers must do everything in their power, particularly during the current gas crisis, to support customers and recognize the significant anxiety and worry that increased direct debits can cause.”
The energy market was battered last year as a combination of the industry price gap and rising wholesale costs drove almost 30 suppliers out of business.
Ofgem is trying to prevent a repeat of this situation by studying the financial sustainability of energy suppliers and the machinations of the market.
It also named a group of providers where it found “minor weaknesses”, including a “lack of documented policies or guidelines for staff”. That group consisted of Bulb, now in taxpayer-funded administration, E.ON, Octopus Energy, Outfox the Market, Ovo, Shell and Utility Warehouse.
British Gas, EDF, ScottishPower and SO Energy had no “significant problems” in processing customer direct debits, the watchdog found.
The review found that debit levels for customers on standard variable tariffs increased by an average of 62% between February and April, largely due to the increase in the price of gas. Ofgem said it has asked providers to review the accounts of all customers whose direct debits have increased by 100% or more.
Doug Stewart, chief executive of Green Energy UK, said: “Ofgem has highlighted areas where we can make improvements and we are already taking action to address these areas. However, I believe that given the challenging state of the market, Ofgem needs to stand up to rogue suppliers, like us, who survived the market crash and [are] we do everything we can to help customers.”
Utilita said it was “shocked and disappointed by Ofgem’s decision to name and shame suppliers at this time” and disagreed with the regulator’s categorisation.
Sign up for the Business Today daily email or follow Guardian Business on Twitter at @BusinessDesk
A spokesperson for Good Energy said: “Ofgem has only raised one concern about our direct debit management. This is related to internal documentation and we are taking swift action to address it.
TruEnergy said it “welcomes stricter regulation by Ofgem and is working with the regulator to demonstrate full compliance with all areas of the supplier’s license conditions”.
Ecotricity, whose founder Dale Vince – the chairman of Forest Green Rovers Football Club – put the business up for sale in April, saying he wanted to “pass the baton”, was approached for comment.
Add Comment