Self-reporting reduces enforcement action

Over the past 10 years, energy suppliers have been fined a total of £125.2mn, including redress payments, for failing to comply with their obligations. Over three-quarters (79%) of which are attributed to domestic cases, and the remainder (21%) to business. Penalties for non-domestic licence breaches, issued during 2014-2017, have been focused around terms of contracts, electricity meters, objections and fuel mix disclosure, respectively.

In recent years there has been a notable emphasis on reduced fines and greater redress payments. For instance, penalties during 2015-2017 include reduced fines (£1 to £7), with the remaining amounts paid in redress. Additionally, we can observe the clear benefits of self-reporting and proactive management of issues before they become formal enforcement cases. There were several examples of this last year.

The refunding of customers and voluntary redress payments by Utilita in 2017, representing a total of £3.61mn, followed its failings to correctly implement price cuts to within the level of the prepayment meter (PPM) safeguard tariff for some of its smart meter customers. Ofgem said that Utilita identified and promptly addressed the technical issues with its SMETS 1 and Non-SMETS meters, that led to the overpayment. It also said that Utilita had come forward to inform the regulator of its mistake and continued to brief them throughout the process.

Similar compliance activity in in relation to vulnerable customers, involving SSE, npower and E.ON, has also resulted in the absence of enforcement action by the regulator. For instance, following the refund and compensation of 337 of its PPM customers, Ofgem did not proceed with its investigation, nor did it take subsequent enforcement action against SSE.

In these instances E.ON and npower wrongly informed its customers that exit fees would apply if a switch occurred during the 49 days prior to the end of a fixed term contract. While E.ON paid £21,000 redress to mis-advised customers who cancelled or delayed switches as a result, npower refunded four of its affected customers. No formal enforcement action was taken by the regulator against either supplier.

This year we have seen one supplier issued with a £260,000 (minus the £1 fine) redress payment, and the opening of an investigation on 2 February to do with suspected breaches of SLC 31A and SLC 0 (formerly SLC 25C). Currently, there are six open investigations, five of which concern SLC 25 (prior to October 2017) or the Standards of Conduct (SLC 0).

As well as the drive to self-report non-compliant activities to Ofgem, suppliers are expected act quickly to reimburse customers who have been overcharged for example, especially customers considered to be vulnerable. Still, it is clear that the regulator intends to continue to issue penalties relative to the seriousness of licence breaches. The move to redress reflects the view that such monies can achieve greater consumer benefits, rather than simply just punishing the supplier.

We have just completed our quarterly update of the Compliance Portal, including information on investigation outcomes and new supplier obligations relevant to Q417 and Q118.

For more information on the Compliance Portal or to request a free trial please contact Vicky Simonds on v.simonds@cornwall-insight.com

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