‘Reckless’ Ovo displayed ‘poor attitude’ towards regulation

A report by Ofgem has issued a damning verdict on challenger brand Ovo Energy. The firm was found to be in breach of 10 licence requirements concerning the way it had previously billed its customers. Adam John takes a closer look at what went wrong at the supplier, which has recently been allowed to take on 3.5 million customers from SSE Energy.

Ovo Energy has been described as “reckless” and its senior management as displaying a “poor attitude to the company’s regulatory obligations”, leading to a corporate culture in which regulatory obligations seem to have been viewed as “optional or unimportant”.

That is the verdict of a damning 46-page report published by Ofgem this morning (29 January), following a two-year investigation into 10 licence breaches relating to inaccurate billing.

In one case, a customer was owed a refund of around £4,500.

Ovo has featured heavily in the news recently, following its £500 million acquisition of the retail arm of SSE which saw 3.5 million customers transferred to the challenger brand.

One industry insider questioned the decision to allow Ovo’s acquisition of SSE’s retail arm, considering Ofgem knew about the major issues.

“My only reaction to Ovo being fined is I find it somewhat interesting Ofgem having an enquiry going on for two years and allowing Ovo to add 3.5 million customers into its portfolio.

“It just seems strange to me. I think we probably need a review of oversight.”

Another added: “I would have thought they would have at least highlighted it.”

The Competition and Markets Authority (CMA) which approved the acquisition only has the power to investigate the merger to see if there are competition concerns as opposed to the conduct of the company involved.

Meanwhile Ofgem said, before the CMA approval, that it will work closely with both companies to ensure that if the deal was approved, the transfer of customers would be “as smooth as possible”.

“We expect suppliers involved in any trade sale to fully consider the impact on customers, provide clear communications and deliver a positive customer experience throughout”, the statement added.

The forthcoming supplier licensing review, which was under consultation at the end of 2019, looks to introduce milestone checks in which Ofgem assess suppliers as they grow.

Additional checks are being considered which would help to ensure that suppliers are adequately prepared for growth before they reach the certain milestones. The checks would also enable Ofgem to take early steps to prevent consumer harm from occurring.

Breaches

In total, 10 licensing breaches have been outlined by Ofgem.

Hundreds of thousands of customers were affected, including 500,000 who were sent inaccurate annual statements between July 2015 and February 2018, with many not actually receiving a statement.

Around 10,000 customers were not given statements of renewal terms (SoRT) when tariffs were ending or were not moved to new tariffs when their existing one ended.

Meanwhile 17,500 prepayment meter (PPM) customers were not initially charged at the correct regional level of the PPM cap; a further 8,000 customers ended up paying above the level of the PPM cap due to Ovo not moving them to new tariffs when their current one ended.

The Energy Ombudsman has revealed today that it has seen an increase in complaints about Ovo in recent years as the company has grown.

A spokesperson tells Utility Week: “Billing is the top source of complaints for Ovo Energy and this is consistent across all UK energy suppliers.

“An increase in complaints about Ovo Energy has been seen in recent years as the company has grown.

“We’re encouraged by Ovo Energy’s actions to put processes in place to comply with rules in future.

“We continue to work closely with Ovo Energy to share our complaints data and insights to help further inform improvement measures.”

Ofgem says Ovo’s senior management were aware of the issues and in some cases considered it “disproportionate to prioritise” and efforts were instead concentrated on other areas of the business.

The regulator believes the deprioritisation resulted in the breaches and that the risk of consumer detriment and regulatory non-compliance should have been apparent to the supplier. As a result, Ofgem branded Ovo’s conduct as “reckless”.

Throughout the report Ofgem highlights the concerns it had with Ovo’s reaction to the mistakes it made and the impact it had on customers. One concern was the approach taken in issuing refunds to customers impacted by an issue regarding the estimation of bills in winter 2017.

The supplier decided to write off bills where customers had been undercharged and had left Ovo as well as those still on supply who were undercharged by less than £100.

However Ofgem said Ovo decided to not proactively issue refunds/credits below £10, explaining that it did not believe it was an efficient use of resources to process 120,000 small value refunds/credits. The supplier instead proposed to use the money to write off debts of former customers.

Ovo did later start issuing refunds to customers who requested it, the report added.

Another major issue highlighted in the report is that of Ovo’s failure around statements of renewal terms (SoRT). Suppliers are required to send a SoRT between 42 and 49 days before a fixed-term tariff is due to end as they highlight the options available if a customer takes no action at the end of their contract and is automatically rolled over to a default tariff.

Some customers were never issued with a SoRT and so remained on historic tariff rates. Furthermore, an issue with the way Ovo calculated seasonal costs resulted in the wrong information being supplied.

Customers receiving inaccurate information on bills, Ofgem says, may result in them making switching or renewal decisions and therefore missing out on potential savings that may have been available.

Response

In its response to the report, Ovo accepted the findings and apologised to customers.

A statement from the company added: “Since the day we were founded, serving our customers has been our number one priority. We strive to give them the best experience by working hard to provide the latest digital innovations and excellent service. We have pioneered a new business model for the industry and have constantly innovated to simplify energy for our customers.

“Ovo Energy holds itself to high standards, but we have not always got it right. We accept Ofgem’s findings of issues regarding estimation processes, information formatting and pricing errors.

“We are proud of our record. In particular, during the time these infringements occurred, we were voted Uswitch supplier of the year four out of five times and achieved a customer satisfaction score of 96 per cent – the highest in the survey’s 11-year history at the time.”

A blog also published by Ovo today claims the company “worked tirelessly” to put in place improved systems and practices as soon as it discovered the issues. Yet Ofgem’s report refutes this, and instead says the company had been aware of some of the issues for a “long time” and had not acted to rectify or contain them.

Rik Smith, energy expert at Uswitch.com, says: “Ovo Energy has long enjoyed a good reputation and loyal support from their customers which has led to them being awarded by the industry.

“But Ofgem has found that once Ovo became aware of mistakes, they didn’t let the regulator know or prioritise resolving the issues.

“Customers must come first. Ovo has to get these things right – they’re a big, well-established company about to become even bigger when they take on another 3.5 million customers from SSE.”