Ofgem must be ‘more transparent’, says governing body

Ofgem’s governing body has announced the regulator ‘should be more transparent’ about its compliance and enforcement work and take a bolder approach to communications about the retail energy market.

At its March meeting, the Gas and Electricity Markets Authority (GEMA) discussed the need for Ofgem to be more impactful in driving better quality of service for energy consumers and that it should signal this strongly. It urged the regulator to continue to share messages about the medium to long term vision for the energy sector.

Ofgem, in a foreword to its own Retail Supplier and Enforcement Report – which aims to ‘shine a light’ on some of its compliance and enforcement activities during the first half of 2018 – says it wants to help retail energy suppliers learn from its work, better understand their obligations, and prepare effectively for regulatory changes.

Its director of conduct and enforcement, Anthony Pygram, said a ‘new reality’ of technological change and the rollout of smart meters has meant the regulator’s compliance and enforcement functions are adapting to reflect this.

In ‘a note on publicity’ the report adds: “The Authority has decided that Ofgem should be more transparent about its compliance work and be more proactive in communicating it to stakeholders. This includes while compliance work is still in progress.

“In the past, Ofgem has not normally commented on ongoing compliance work, even where there is a high level of consumer concern and media interest about a particular issue or supplier. We adopted this approach to avoid any risks that might arise from commenting publicly about matters that could subsequently be the subject of formal enforcement proceedings.

“However, we acknowledge that a policy of not commenting publicly itself risks creating a false impression that Ofgem is not acting to protect consumer interests, or suppliers aren’t acting to improve things, which in turn could undermine trust in the energy market.”

It adds that Ofgem may provide statements to the media and consumer groups ‘if asked about a specific issue’ when it is carrying out compliance work, in order to provide greater transparency.

The report also identifies compliance issues likely to be of relevance across the market, highlights Ofgem’s expectations, summarises the key learning points for suppliers and flags some important changes to the regulatory framework.

It also explores three key themes:

• Providing timely and accurate information
• Tariff and product offerings
• Supporting customers in vulnerable situations

Ofgem said billing was an ‘essential function’ for telling customers about their energy usage and annual statements ‘can and should’ help consumers manage their consumption and costs effectively.

This will only be realised, it says, if customers can quickly and easily access and understand the information, and can rely on its accuracy. Ofgem cited the example of SSE agreeing to pay £1 million into the regulator’s consumer redress fund after the big six company sent inaccurate annual statements to its PPM customers.

Following this incident SSE now carries out extra checks on its customer communications after IT changes. It also gives extra resources to the teams responsible for managing systems changes and user acceptance testing, including formal procedures and rigorous regression testing.

Smart meters are also raised in the report, with EDF’s failure to meet its  installation milestone for 2017 used as an example. The supplier agreed to pay £350,000 into Ofgem’s redress fund.

And the report stresses how regulatory obligations require suppliers to make it easy for customers to contact them and to act ‘promptly and courteously’ to put things right when they make a mistake.

Ofgem provided the example of Toto Energy which, in December 2017, failed to ensure that some of its pre-payment meter [PPM] customers had functioning cards to top-up their meters, which led to a surge in customer self-disconnection over the Christmas holiday period.

The problem was compounded by inadequate customer service arrangements which meant many of those consumers affected had difficulty getting in touch to resolve the issue.

The regulator said that following “urgent compliance engagement”, the supplier improved its processes and practices, for example by requiring its engineers to provide a top-up card when installing the meter.