Ofgem penalises Hudson Energy Supply UK Ltd (HES) following serious overcharging of business customers
- Ofgem has found energy company HES has failed its customers by failing to comply with a number of important licence conditions
- These failings relate to a situation whereby HES had outsourced elements of its day-to-day customer operations without appropriate supervision
- Issues found included serious unjustified overcharging of customers, in one case of £22,500, as well as failure to return credit refunds owed, resulting in serious customer harm
- Energy regulator is now proposing to issue a £1,668,426 penalty to HES in respect to these serious breaches
Energy regulator Ofgem has today (Wednesday 29 November 2023) published the findings of a detailed and complex investigation, opened in July 2020, which has found ten breaches of Standard Licence Conditions (SLCs) by HES.
HES is a non-domestic market energy supplier, which, at its highest, served up to 1,600 business customers across the UK.
HES had put in place an arrangement with a third-party, whereby that party acquired customers for HES, and conducted a number of customer facing activities. The arrangement ended in July 2020.
Ofgem is committed to protecting businesses, and carries out regular enforcement activity, which is particularly crucial at a time when consumers are struggling with high energy bills.
Through its work on this investigation, Ofgem’s enforcement team found that HES had:
- Failed to ensure appropriate arrangements were in place to achieve compliance with its licence obligations throughout the duration of the relationship with the third party;
- Outsourced elements of the day-to-day operations of its business without the appropriate supervision, which resulted in the delivery of poor customer service and inappropriate actions to be taken towards HES customers;
- In one particular month customers suffered serious overcharging – on average customers were overcharged by more than £1,800, with one customer overcharged by around £22,500. Some customers did not receive their money back for up to seven months after it was taken from them;
- Breached conditions relating to the provision of important information at the time of contract renewal, leaving many microbusiness customers (MBCs) without the required information to make informed switching choices and take advantage of other deals available.
Cathryn Scott, Director of Enforcement and Emerging Issues at Ofgem said:
“As part of our role as the energy regulator, we expect suppliers to comply with their obligations, including where they choose to outsource elements of their business. In this case a series of failings by HES has resulted in unacceptable outcomes for energy customers, with a number being unjustifiably overcharged by significant amounts, resulting in serious customer harm.
“Through taking this action Ofgem is sending a firm signal to the market that it is not possible to outsource compliance with the licence conditions: the licence holder is responsible for any breaches and any harm caused to its customers.
“This significant penalty should send a strong signal to all suppliers in the market to act with the utmost care and integrity when it comes to engaging and monitoring third parties carrying out important areas of their supply business on their behalf. This is a difficult time for all customers, and poor service and deliberate overcharging will simply not be tolerated.”
In addition to overcharging customers, nine other SLC breaches were identified, some lasting for nearly five years. These included:
- Failing to properly identify MBCs, leaving many customers affected without the relevant additional protections they are entitled to, such as the right to go to the Ombudsman in respect of any unresolved complaint
- Issues relating to the handling of credit balances on former customers’ accounts, whereby credits owing to customers were not returned promptly or at all. Closed account credit balances owed to customers totalling £365,000 were amassed.
Being classed as a MBC provides additional protections, other companies may not be afforded. These relate particularly to contractual terms, such as rollover contracts not being allowed to exceed 12 months and an ability for the MBC to terminate their rollover contract, without being required to give any form of notice.
MBCs are also protected by Ofgem’s backbilling rules, meaning they should not be charged for unpaid energy use more than 12 months ago if an accurate bill (or statement of account) was not provided to them.
In response to the case brought, HES has now:
- Admitted to all of these breaches, with Shell, who took over the ownership of HES in 2019, having taken appropriate remedial actions to ensure that these failures are not repeated in its business
- Agreed to settle the case with Ofgem, via a penalty of £1,668,426, to be paid into Ofgem’s Voluntary Redress Fund, which supports energy consumers in vulnerable situations, and invests in innovation and carbon emission reducing projects.
The vast majority of the money owed to customers has now been returned to affected customers. This detailed and thorough investigation by the regulator is just one of many enforcement cases undertaken by Ofgem.
Notes to Editors
Ofgem has opened a Call for input on the Non-Domestic gas and electricity market and a Non-domestic market review: Findings and Policy consultation on the issue that both took place earlier in 2023.
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