Octopus Energy pay a total of £1.5m to former prepayment meter customers due to a failure to issue final bills
Decision
- Publication date
- Company
- Octopus Energy Limited
- Industry sector
- Supply and Retail Market
- Licence type
- Electricity Supply Licence
- Gas Supplier Licence
Since 2016, Octopus Energy Ltd (“Octopus”) did not send a final bill to the majority of prepayment meter customers within 6 weeks of the supplier transfer or termination of the Domestic Supply Contract (i.e. after they left the supply of Octopus) as required by Standard Licensing Condition 27.17 of the gas and electricity supply licences.
Ofgem recognises customers using prepayment meters can be vulnerable. As vulnerable customers may be less able to protect themselves or advocate for their interests within the supply contract relationship, it is particularly important suppliers carefully follow regulations to safeguard these customers.
Ofgem acknowledges that prepayment customers pay upfront for electricity and gas, unlike credit customers. They track their balance on the meter and top up as needed, allowing them to see their final balance directly on their prepayment meters.
Octopus did not issue final bills for the majority of their prepayment customers. Therefore, a number of customers did not receive notification of credit balances left on their accounts, nor refunds of their credit balances and/or compensation payments relating to Octopus’s failure to comply with the Guaranteed Standards of Performance (GSOP) Regulations.
Although customers have sight of their balance on prepayment meters, it is right that a final bill is produced in order to give them a clear indication of their final debit or credit position. Ofgem recognises that suppliers do not always benefit from credits left on a prepayment meter account as these funds may be used by the new owner or tenant. However, this money is nonetheless owed to the customer who has accrued the credit and should be returned.
A case was opened against Octopus after the self-report of another supplier led Ofgem to believe that Octopus may not be compliant. Ofgem has worked to ensure that credit balances were returned to customers, together with GSOP compensation payments and an additional level of redress to recognise the impact of not receiving credit balances and GSOP payments on time. Where it was not possible to trace a customer, Octopus has agreed to make payments to the Energy Industry Voluntary Redress Fund (EIVRS). The fund is administered by the Energy Saving Trust, which has been appointed by Ofgem to distribute payments from the fund to help support energy consumers in vulnerable situations.
Full details are set out below:
Across the period of non-compliance, 34,494 customers were found to have been affected. The average sum paid to customers was £43 per account. Octopus voluntarily wrote off the debt of those customers who left supply during the period of non-compliance.
Octopus has updated its billing processes and systems to resolve the issue and ensure final bills are now being sent in accordance with SLC 27.17.
This area of non-compliance was the subject of previous Ofgem cases against:
- E.ON Next – E.ON Next pay a total of £14.5m to former prepayment meter customers due to a failure to issue final bills; and
- Good Energy - Good Energy pay a total of £150k to former prepayment meter customers due to a failure to issue final bills
Key messages to suppliers
It is important that suppliers understand their obligations under:
i) Standard Licence Condition 27.17, the requirement to take all reasonable steps to send a final Bill or statement of account of the Domestic Customer’s account within 6 weeks of the supplier transfer or termination of the Domestic Supply Contract.
ii) Guaranteed Standards of Performance (GSOP) regulation 6CA (2020) and regulation 8 (2015), the requirement to make a standard (compensation) payment of £30[1] within 10 working days of the supplier’s failure to issue a customer a final bill within 6 weeks of the supplier no longer having responsibility for the supply of electricity or gas. If the supplier fails to make a standard payment on time it must make an additional standard payment of £30 within a further 10 working days.
iii) Standard Licence Condition 5A, the requirement to be open and cooperative with Ofgem. The licensee must disclose any actions or omissions that give rise to a likelihood of detriment to Domestic Customers.
Ofgem would like to stress the importance of suppliers being open and cooperative with the regulator, self-reporting instances of non-compliance, thereby ensuring that customer detriment is kept to a minimum. Suppliers should have robust governance and risk management processes in place with the ability to identify and mitigate the risk of consumer detriment. They must ensure their systems, processes and practices are compliant with all regulatory requirements.
1 An increased compensation payment level of £40 took effect from 2nd January 2025, however £30 was applicable during the period of non-compliance Supplier Guaranteed Standards of Performance (GSOP) Payment Uplift