Ofgem closes compliance case with E.ON, regarding Direct Debit payments being taken early

Decision

Publication date

Industry sector

Supply and Retail Market

Ofgem has closed compliance engagement with E.ON relating to Direct Debit payments being taken earlier than agreed from 1.6 million customers. Most of the payments were due to be taken in early January but E.ON erroneously took these Direct Debit payments, on 24 December 2020. Taking these payments earlier than agreed over the Christmas period may have caused customer detriment and, in particular, could have adversely impacted customers in poverty or vulnerable circumstances.

E.ON self-reported this issue to Ofgem on 24 December and continued that engagement throughout January and February 2021. Ofgem requested information relating to this error.  As part of that request, E.ON told us that they had made redress and goodwill payments totalling £55,039 to customers who suffered additional bank charges or out of pocket expenses as a result of the Direct Debits being taken early and had contacted E.ON.

E.ON has committed to continue to make redress and goodwill payments for bank charges, out of pocket expenses and other detriment to customers that make legitimate claims in respect of this issue. We expect E.ON to consider these claims sympathetically and continue to process them efficiently. Customers who experienced any of these issues should contact E.ON to make a claim.

Additionally, E.ON estimated the maximum detriment that this error could have caused customers and will pay an equivalent amount (£427,312) into the Voluntary Redress Fund. E.ON will also pay £200,000 into the fund in recognition of its failure to address underlying system and governance weaknesses which would have prevented this from occurring. This has brought the total Voluntary Redress Fund payment to £627,312.

We have agreed to close engagement following commitments from E.ON to address the root causes of the issue and compensate any customers that suffered detriment.

The issues were as follows:

  • A technical fault occurred following changes E.ON made to friendly credit hours1 for Pre-Payment Meter (PPM) customers between Christmas and New Year. At the time it was not recognised by E.ON that a change to the PPM systems would impact instructions to E.ON systems in respect of Direct Debit payments. This technical fault led to Direct Debit payments being taken earlier than scheduled.
  • Most customers expected payments to be taken in early January. This meant that customers may have experienced out of pocket expenses, unexpected overdraft bank charges, inability to make payments in the run up to Christmas and other unforeseen circumstances as a result.
  • E.ON became aware of the issue on 23 December and communicated this issue to customers on 24 December. Most payments were recredited to accounts on 29 and 30 December 2020 and then retaken on the appropriate date.
  • E.ON identified an additional 110,060 customers who had been impacted by the issue on 31 December and were not included in the original refunds. For those customers who did not receive refunds, E.ON ensured that a further Direct Debit claim was not made on the correct date.

Ofgem considers that when E.ON decided to change friendly credit hours for PPM customers between Christmas and New Year, it failed to conduct the appropriate checks to ensure that this would not lead to any unintended consequences for customers. Although E.ON would normally have taken these payments at a later date,  Ofgem nonetheless takes these failures by E.ON very seriously as it impacted a large number of customers in the run up to Christmas, where finances for many may have already been stretched.

Expectations for all suppliers:

  • On occasion, suppliers choose to make changes to their operational arrangements. These changes can impact large numbers of customers, so it is important that suppliers prioritise risk mitigation and consider all the consequences of these changes thoroughly and in good time to prevent adverse outcomes.
  • Ofgem expects that suppliers adhere to the terms of contracts that they have with customers, in particular the agreed Direct Debit payment dates. Standard Licence Condition (“SLC”) 22.3 requires that licensed suppliers supply Electricity and Gas in accordance with the Domestic Supply Contract.
  • In accordance with Standard Licence Condition (“SLC”) 0.3(c), Ofgem expects suppliers to act promptly to put things right when they make a mistake. E.ON’s identification of a further 110,060 customers impacted by this issue on 31 December suggests that it did not do this.

[1] Friendly-hours Credit means an amount of credit provided overnight, at weekends and public holidays to a Domestic Customer when that Domestic Customer’s Prepayment Meter credit runs low or runs out to ensure continuity of electricity supply or return on supply.