Decision of the Gas and Electricity Markets Authority to close its compliance engagement with Green Star Energy on the requirements of Standard Licence Conditions 25 and 31A of its gas and electricity supply licences

Publication date
19th September 2018
Information types
Policy areas

Ofgem recently concluded its compliance engagement with Green Star Energy, the trading name of Hudson Energy Supply UK Ltd for domestic supply, on its compliance with Standard Licence Conditions 25.3 and 25.4 on Informed Choices and Standard Licence Condition 31A.9 on the provision of annual statements. Following this engagement, Green Star Energy has taken a number of actions aimed at bringing it into compliance with these licence conditions, financially compensated affected customers, and paid a voluntary contribution to the Energy Industry Voluntary Redress Fund.

Under Standard Licence Condition 25.3 and 25.4, suppliers must ensure that when they advertise their tariffs to consumers, they do so in a way that is not misleading and ensures that consumers can compare all the tariffs relevant to their circumstances. Standard Licence Condition 31A.9 requires suppliers to provide their customers with essential information to help them understand their tariff, cost and consumption by means of an annual statement.

Ofgem became aware in February 2018 that Green Star Energy was using Utility Discount, a third-party intermediary (TPI), to acquire customers. Utility Discount did not make it clear to consumers throughout its sales channel for Green Star Energy that it primarily offered Green Star Energy tariffs, instead of providing a wider selection of tariffs from across the market. Under Standard Licence Condition 25, suppliers are responsible for the conduct of any third parties acting as their Representatives. Following our engagement, Green Star Energy directed Utility Discount to make a number of changes to their acquisition process to make it clear to consumers where only Green Star Energy tariffs were offered and this was resolved for new acquisitions from 25th May 2018.

Green Star Energy also identified all 8,815 customers acquired through Utility Discount and is in the process of paying them compensation of £41 each in recognition of the fact that these consumers could have switched to a cheaper tariff, for a total of £361,415. The supplier has paid compensation to 7,943 credit customers for a total of £325,663 and is in the process of compensating the remaining 872 pre-payment customers. Green Star Energy will also allow all affected customers to leave without paying exit fees, and has made an additional voluntary contribution of £151,376 to the Energy Industry Voluntary Redress Fund in recognition of its non-compliance.

Green Star Energy self-reported to Ofgem in March 2018 that Green Star Energy had not provided some consumers with essential information included in annual statements between August 2014 and November 2017. This was due to a failure in its billing systems which meant that no annual statements were generated when Green Star Energy had been trading for 12 months and was required to start sending these to customers. Following our engagement, Green Star Energy has implemented a number of system upgrades and is in the process of providing all customers who did not receive their Annual Statements with an Annual Statement. Green Star Energy has also made a contribution to the Energy Industry Voluntary Redress Fund of £166,492 in recognition of its non-compliance and the potentially deleterious effect on consumer switching.

As of September 2018, Green Star Energy has made progress with upgrading its systems to enable it to produce Annual Statements and has ceased use of Utility Discount’s website journey for customer acquisition until it can ensure compliance with Standard Licence Condition 25. It has also committed to the payments above, totalling £361,415 in compensation and £317,868 in contributions to the Energy Industry Voluntary Redress Fund, for a grand total of £679,283.

Key lessons learned

  • Suppliers are responsible for the conduct of any third parties they commission to act as their Representatives, and they must ensure these third parties comply with the Standard Licence Conditions in the same way suppliers ensure their own compliance.
  • We expect suppliers to be open and transparent about acquisition arrangements they make with third parties, so that consumers know exactly what tariffs they are being offered, and why.
  • Suppliers must ensure that their core systems, whether operated in-house or contracted out, are fit-for-purpose and ensure that suppliers can undertake their business activities in compliance with the Standard Licence Conditions.
  • We will take into account whether suppliers self-report potential non-compliance to us, as well as their engagement through the compliance process, in determining the appropriate course of actions resolve the issue.