British Gas Business makes payments of £5.6M following errors in its switching and renewal processes

10 Apr 2014 10:13 AM

• Ofgem found British Gas Business incorrectly blocked businesses from switching and failed to give some businesses notice that their contract was due to end
• Supplier has already paid nearly £1.3m to affected business customers, and will now pay a further £3.45m into an energy efficiency fund and an £800,000 penalty
• Switching fairly and easily is central to a well-functioning market
• British Gas Business took swift action and has now remedied these issues

Ofgem’s investigations found that British Gas Business had incorrectly blocked business customers from switching to other suppliers and failed to notify customers when their contract was due to expire. In recognition of these failures, British Gas Business is paying £5.6 million in redress and penalty.

Ofgem found that from 2007-2012 around 5.6% of the objections made by British Gas Business to non-domestic customers wanting to switch suppliers were invalid. This was caused by errors in British Gas Business’s computer systems, and there being inadequate processes and controls in place to detect when objections to switches were invalid. In addition, they did not properly communicate to customers the reasons for their objections to switching and how customers could resolve this. Ofgem opened the investigation into British Gas in 2012 and they resolved these issues swiftly. British Gas Business will pay an £800,000 penalty and finance an Energy Efficiency Fund to benefit micro-business customers.
 
In a separate investigation, Ofgem found that British Gas Business failed to give notice to around 1,200 business customers (most of which were micro-businesses) that their tariff was about to expire. This meant that customers were denied the prompt to shop around for a better deal and instead either continued on the same terms or were rolled over onto standard tariff rates, which were more expensive than their previous contract. British Gas Business has already paid back nearly £1.3 million to fully compensate all current customers affected by this issue, and is in the process of contacting and paying back around £150,000 to affected customers who have since moved to other suppliers. If they cannot find those customers, the remaining money will also go into the Energy Efficiency Fund.
 
Sarah Harrison, Ofgem Senior Partner in charge of enforcement said: “The ability for consumers to switch easily and fairly is key to a well-functioning energy market. In these cases British Gas Business failed these consumers who were wrongly blocked from switching, many of them small businesses, and denied others the chance to switch to a better deal at the end of their contract.
 
“British Gas Business fully accepts its failings, has stopped the practices and corrected its processes to prevent this happening again. The company has taken responsibility for its actions and this package strikes a balance of penalty for the company and redress for affected consumers.”

British Gas Business cooperated fully throughout these investigations and this has been reflected in the level of the settlement package, which would have been much higher if this had not been the case.

Notes to editors

1. Details of £5.6million package

Where non-domestic customers were incorrectly blocked from switching supplier:

• £3.2m will be paid into the Energy Efficiency Fund in recognition of the invalid objections. The fund will provide energy efficiency measures, such as insulation and new boilers, to micro-business customers.
   
• British Gas Business will pay an £800,000 penalty.

Where British Gas Business did not notify customers when their contract was due to expire:

• Over £1.4 million will be paid back directly to those who did not receive their renewal documentation on time. British Gas Business has fully compensated all current customers affected by this issue, and is in the process of contacting and compensating affected customers who have since moved to other suppliers. If British Gas Business cannot find and compensate these customers, this money will also go into the Energy Efficiency Fund.
   
• A further £250,000 will be paid into the Energy Efficiency fund in recognition of British Gas Business’ failure to send renewal documentation on time to around 1,200 non-domestic customers.
   
• Read here for more information about the penalty notice.

2. Blocking customers from switching supplier

There are some legitimate circumstances in which suppliers can object to a consumer switching, for example if the customer owes money on the account. However, where this is the case, Ofgem rules state consumers must be given timely and clear information as to why the switch is being blocked and how this can be resolved.

Our investigation found that British Gas Business did not use its ‘blocking power’ fairly in 5.6% of the occasions where it objected to customers switching away.

3. Ofgem’s protection for small businesses

Ofgem has taken significant action to increase protections for micro-businesses including:

• Introducing enforceable standards of conduct to ensure suppliers treat them fairly on issues such as billing, switching supplier and contracting with them. More information can be found on our website.
   
• All of the large suppliers have pledged to stop auto-rollover contracts in their current form in 2014 and Ofgem is currently reviewing this practice more widely. Ofgem continues to take action to help businesses understand their choices, so they know that negotiating new contracts could help them reduce their energy bills.
   
• Since November 2013, Ofgem has had new powers to clamp down on ‘rogue’ brokers and other organisations marketing to businesses in a misleading way. Ofgem is also developing a code of practice for tougher regulation of brokers and other intermediaries.

4. Ofgem is the Office of the Gas and Electricity Markets, which supports the Gas and Electricity Markets Authority, the regulator of the gas and electricity industries in Great Britain. The Authority’s powers and duties are largely provided for in statute, principally the Gas Act 1986, the Electricity Act 1989, the Utilities Act 2000, the Competition Act 1998, the Enterprise Act 2002, the Energy Act 2004 as well as arising from directly effective European Community legislation.

For further press information contact:

Lisa O’Brien 0207 901 7426
Dafydd Wyn 020 3263 9943
Rory Edwards 0207 901 7246
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