Three suppliers pay total of £8 million in relation to 'Guaranteed Standards of Performance' Final Billing Compensation failures
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Ofgem has concluded compliance engagement with three suppliers in relation to their application of the Guaranteed Standards of Performance (GSOP).
The GSOP regulations require suppliers to meet certain standards of performance for their customers, such as providing them a final bill within six weeks if they choose to move to a new supplier. If a supplier fails to meet this standard, then they must provide an affected customer, a 'Standard' compensation payment of £30. If the supplier fails to compensate the customer in a timely manner (within the first 10 working days after the six week period), then the customer is due an 'Additional Standard' GSOP compensation payment of £30.
In total, E.On Next, Good Energy and Octopus Energy either missed or unduly delayed Guaranteed Standards of Performance compensation payments due to consumers worth £6,305,925. Over 100,000 customers were affected by these issues. Ofgem has worked with these suppliers to ensure all affected consumers received the payments to which they were entitled, as well as additional compensation of £1.7million to customers or the Energy Industry Voluntary Redress Scheme (EIVRS).
The suppliers involved did not issue a final bill to affected customers within six weeks and they did not compensate these customers for this failure within a timely manner. Some customers waited more than a year to receive this compensation. In addition, suppliers failed to make an 'Additional Standard' compensatory payment of £30 that was due to these customers, within the allowed 10 working day period after the date the ’Standard’ compensation payment was due. The problems occurred because the suppliers' billing processes and systems were not set up to deliver the Guaranteed Standard of Performance payments in line with the timeframes set out in the Regulations. Following a self-report from E.On Next regarding GSOP compensation for final bills, Ofgem acted on the issues raised during further supplier engagement.
Ofgem takes compliance with the Guaranteed Standards of Performance regulations seriously, so that consumers can rely on final bills being produced quickly after they switch supplier and receive compensation where their supplier fails to do so. It is important that suppliers follow these rules, including those that govern the provision of statutory GSOP and 'Additional' compensation, and to ensure all compensation is provided to customers within a timely manner.
These rules are set out on the government’s legislation website: The Electricity and Gas (Standards of Performance) (Suppliers) Regulations 2015 and The Electricity and Gas (Standards of Performance) (Suppliers) (Amendment) Regulations 2020.
The suppliers involved have updated their billing processes and systems to resolve the issues and ensure payments will now be made in line with the Regulations. In addition to securing payment of the appropriate compensation payments, Ofgem also secured additional redress for consumers to recognise the impact of not receiving their original compensation on time.
Key messages to suppliers
- It is important that suppliers clearly understand the Guaranteed Standards of Performance (GSOP) regulations, including those that govern the provision of statutory GSOP compensation payments, and that they ensure their systems provide these payments at the point of failure to meet a Guaranteed Standard of Performance, within a timely manner, and to the timeframes stipulated within the regulations.
- If suppliers fail to compensate the customer in a timely manner (i.e. provide a 'Standard' compensation payment of £30 within the first 10 working days of the supplier's initial failure to achieve the relevant standard of performance) then they are obligated to provide the customer an 'Additional' GSOP compensatory payment of £30. Ofgem expects suppliers to make an 'Additional Standard' GSOP compensatory payment of £30 to those customers at the point of failure to meet their payment obligations outlined in Regulation 8 (2), i.e. within 10 working days of the date that the ‘Standard’ compensation payment was due.
- Ofgem expects suppliers to have robust governance and risk management processes in place with the ability to identify and mitigate the risk of consumer detriment. Suppliers must ensure their systems, processes and practices are compliant with all regulatory requirements even when these only apply to a specific set of customers or only apply in specific circumstances.
- Ofgem encourages and expects suppliers to self-report any possible non-compliance or customer detriment as a matter of good practice.
- Ofgem has used a compliance approach in these cases and considers that that this alternative action will act as a deterrent to future non-compliance. Where any further non-compliance is identified, Ofgem will strongly consider taking formal action in accordance with our Enforcement Guidelines.
Redress Packages
The redress packages from all suppliers involved are set out below.
Where it has not been possible to process redress in specific cases, the suppliers involved agreed to make payments to the Energy Industry Voluntary Redress Scheme (EIVRS). E.On Next has also paid £1,330,910 to the EIVRS in recognition of system failings and the inconvenience to customers receiving late GSOP compensation, in relation to delayed final bills. The EIVRS is administered by the Energy Saving Trust. They have been appointed by Ofgem to distribute payments from the fund to help support energy consumers in vulnerable situations.