Market Compliance Review into customers struggling with bills
Ofgem requires suppliers to improve help for customers in payment difficulties, following review
- Three suppliers were found to have severe weaknesses in how they support customers in payment difficulties as part of Ofgem review
- Five suppliers were found as having some issues in the support they provide, and all of those identified have been asked to submit information to Ofgem, to set out how they will improve.
- Key findings include companies being unable to identify customers in payment difficulty and a lack of help given to those requiring crucial payment plans
Energy regulator Ofgem yesterday (Tuesday 27 September 2022) published its Market Compliance Review of 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.
- One supplier was found to have no significant issues (British Gas)
- 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.
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.
Energy suppliers have been facing demands of their own over the past year; however prioritising vulnerable customers struggling to pay their bills during this winter is critical.
Jonathan Brearley, Ofgem CEO, yesterday 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."
In the deep dive across suppliers, although lots of good practice was found, Ofgem found evidence in places that there was a lack of:
- Adequate training materials so staff can do their jobs to support customers – (eg customer service operators lacking relevant training in order to ascertain a customer’s vulnerability / circumstances)
- Management oversight on the quality of customer engagement
- Evidence of policies or processes to identify thresholds for important payment plans and how suppliers ensure these are being set in a fair and consistent manner
- Clarity over how payment plans are reassessed if customers’ circumstances change
- Information provided on company structures to understand how issues are identified, raised, and dealt with from ground level to executive level
- Clear 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 yesterday, Ofgem has also sent a letter to all suppliers outlining the standards expected of them – as well as best practice information.
The next market review will look at customer vulnerability and will be published later this year.
NOTES TO EDITORS
There is no requirement for customers to contact their suppliers about this, as all issues will now be addressed.
This 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.
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.
Ofgem has launched seven market compliance reviews (MCRs) aimed at energy suppliers - Market Compliance Assessments - Update on next steps and further annual assessments in 2022 | Ofgem. They were launched via a letter from Retail Director Neil Lawrence to industry.
Ofgem has published a letter outlining our expectations on suppliers including the key support they should have in place to help household customers struggling to pay their bills this winter. Ofgem has also published good practice advice that suppliers can adopt to ensure customers in payment difficulty can get the best possible support.
The Market Compliance Review for customers in payment difficulty assessment divided suppliers into four groups according to service levels, and those who fail to act as a result of the MCR face the possibility of enforcement action and significant fines:
- No significant issues (British Gas)
- Minor weaknesses (Ecotricity, EDF, EON, Octopus, OVO, Shell, SO Energy and Utility Warehouse)
- Moderate weaknesses (Bulb, E Gas & Electricity, Good Energy, Outfox the Market and Green Energy UK)
- Severe weaknesses (Tru Energy, Utilita and ScottishPower)
Full results of the review: https://www.ofgem.gov.uk/publications/ofgem-completes-review-how-suppliers-support-customers-payment-difficulty
This Market Compliance Review only relates to domestic customers, as non-domestic customers are currently subject to different regulations regarding debt recovery and would require a completely different methodology.
The first Market Compliance Review examined supplier behaviour with regard to direct debits PRESS RELEASE: Ofgem requires improvements from energy suppliers on customer direct debits | Ofgem
See also for background: Consumer Perceptions of the Energy Market Q1 2022 Report https://www.ofgem.gov.uk/publications/consumer-perceptions-energy-market-q1-2022
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