Ovo under review by Ofgem due to billing issues, pays £8.9m
Ovo Energy, the UK’s largest independent energy supplier has seen incredible growth these past few years through a spate of acquisitions and strategic partnerships. However, they were just slapped with an £8.9m fine by Ofgem. Is this the end of Ovo’s meteoric rise? Selectra brings you the essential information below.
Ofgem uncovers Ovo billing issues
The energy watchdog has found that Ovo’s customers suffered incorrect billing and other problems because of “inaccurate or incomplete information”.
The billing issues lasted for more than five years and led to Ovo both under and overcharging customers.
The verdict will come as a blow to the self-esteem of a firm which has long-prided itself on both its customer experience and its technology.
It has enjoyed a reputation for providing good service and has won uSwitch Supplier of the Year for four out of the last five years. In 2019 it came first for customer satisfaction as well as in five other categories.
Despite higher-than-average prices, this good will has helped it grow its UK customer base, which increased by an incredible 50% over the last year.
The Bristol-based company is now the second-largest supplier in the UK following its takeover of SSE’s domestic energy business.
Ofgem said that the problems were the result of Ovo not paying enough heed to whether or not its way of doing business was in line with the rules.
The regulator confirms that the company has invested in new technology and introduced new procedures to stop similar slip-ups happening again.
Over 500,000 customers were sent inaccurate annual statements between July 2015 and February 2018 and many customers did not even get their annual statements.
Another error occurred when Ovo Energy underestimated consumption over the winter season 2016-2017 which led to customers being charged too little or too much on their bills.
More mayhem ensued when it failed to give about 10,000 customers details of their renewal terms when their tariffs were coming to an end or were not switched to new tariffs when their old one ended.
But wait, there’s more!
Prepayment customers get a raw deal
Ofgem’s investigation found that 17,500 customers with prepayment meters were started off on the wrong level of the prepayment meter cap for their region.
An additional 8,000 customers were stuck paying more than the prepayment meter cap because Ovo didn’t move them onto new tariffs when their old tariff expired as it was required to do.
These mistakes led to some customers being over or undercharged for their energy.
While errors are understandable, Ofgem wasn’t impressed when it discovered that, although Ovo Energy was aware of the problems, it didn’t report most of them to the regulator itself and it was too slow to find solutions.
Ovo Energy has since repaid the customers who were charged too much because of the wrong prepayment meter cap and written off all debts of customers charged at the wrong rates.
The firm has also agreed to pay £8.9m into a fund for vulnerable customers.
Anthony Pygram, director of conduct and enforcement at Ofgem, said the supplier “did not prioritise putting these issues right whilst its business was expanding.”
“Our enforcement action sends a strong message that suppliers must get basic services right for all their customers,” he said.
“Ovo Energy has accepted the breaches and put processes in place to comply with the rules in future.”
In response to its collaring by the long arm of Ofgem, Ovo said it “holds itself to high standards”, but it admitted that it had “not always got it right.”
“We accept Ofgem’s findings of issues regarding estimation processes, information formatting and pricing errors”
The UK’s second-biggest supplier is not alone in the doghouse however.
Other UK energy providers also caught
In December the company realized that 3,430 of its bill-paying customers who receive the Warm Home Discount payment had paid more than the default tariff cap level between January and November 2019.
The default tariff cap is a temporary measure which was introduced on 1st January 2019. It protects all customers on standard variable and default energy tariffs and puts a limit on how much suppliers can charge on average.
The bundle-vendor held its hands up and swiftly drew Ofgem’s attention to the issue.
It had overcharged by £150,000. Once it identified the problem it quickly fixed its systems to eliminate it.
The 3,430 Warm Home Discount customers are to be reimbursed and compensated to the tune of £450,000 in total.
An additional sum of £200,000 will be paid into a “voluntary” Ofgem fund, as a sign the firm understands its responsibilities to its potentially vulnerable customers.
Ofgem takes the gloves off
There might be a lesson for other suppliers in the way Ofgem has treated Utility Warehouse compared to how it handled Ovo Energy’s various mistakes.
In its statement on Utility Warehouse the watchdog reminded suppliers to be “vigilant and ensure that customers, including the vulnerable, are treated fairly.”
“Ofgem’s enforcement guidelines strongly encourage companies to promptly self-report potential breaches that may give rise to material harm to consumers, the market or to Ofgem’s ability to regulate,” the regulator said.
It went on to say that, although it regards overcharging potentially vulnerable customers as “a serious matter which must be addressed”, it had decided against levying a larger fine or taking formal enforcement action against the supplier.
“This is due to the steps Utility Warehouse has taken to report the matter to Ofgem, correct the situation, and quickly put in place measures to ensure this issue will not re-occur.”
The moral of the story seems to be for suppliers to own their mistakes, take remedial action and make amends quickly if they want to avoid the full wrath of the watchdog.