The shake-up of the UK energy market was supposed to herald a new era of customer experience; Ovo Energy, however, failed to read the script and is now being forced to cough up £8.9m for a catalogue of gaffes, including misbilling more than 500,000 customers for three years.
According to regulator Ofgem, the company knowingly ignored the problems while it focused on the expansion of its business; it recently became the UK’s second largest energy supplier after completing a £500m takeover of SSE’s consumer division.
Last year, Ovo Energy appointed 20Something on a project basis after ditching Uncommon Creative Studio, which had devised its launch activity.
Ofgem said that Ovo Energy did not “self-report the majority of the issues despite being aware of them and was slow to put things right”.
The regulator’s director for conduct and enforcement Anthony Pygram said: “Ovo Energy billed a number of its customers incorrectly and issued them with inaccurate information. The supplier did not prioritise putting these issues right while its business was expanding.”
Ofgem’s investigation uncovered a multitude of long-running problems, including more than 500,000 customers being sent inaccurate annual statements for three years. Many did not even receive a statement. Other problems included 10,000 customers not being given renewal terms when their tariffs were ending, or not being moved to new tariffs, and inaccurate charges relating to 25,500 customers and the prepayment meter cap.
Ovo Energy was forced to accept that, over a five year period, failings in its tech systems and compliance processes resulted in hundreds of thousands of customers receiving inaccurate or incomplete information.
Even so, in a statement the firm said: “Since the day we were founded, serving our customers has been our number one priority. We strive to give them the best experience by working hard to provide the latest digital innovations and excellent service. Ovo Energy holds itself to high standards but we have not always got it right.”
The energy company has fixed the problems, including refunding customers affected by overcharging on the prepayment meter cap and has agreed to pay £8.9m into a voluntary redress fund to help vulnerable customers.
“Our enforcement action sends a strong message that suppliers must get basic services right for all their customers,” Pygram said. “Ovo Energy has accepted the breaches and put processes in place to comply with the rules in future.”
In a second Ofgem ruling, Utility Warehouse is to pay £650,000 for overcharging 3,430 customers because of a system error when the price cap was applied.
Utility Warehouse self-reported the glitch to Ofgem, confirming overcharges of £150,000. It has refunded the affected customers and also compensated them with an extra £300,000 in goodwill payments. In addition, Utility Warehouse is paying £200,000 into Ofgem’s voluntary redress fund.
Professor David Elmes, an expert on the UK energy industry at Warwick Business School, said: “Until recently, the market for buying gas and electricity was dominated by the big six companies that emerged when the networks providing energy were split up and privatised.
“There have been concerns about whether this offered customers enough choice, good service and the right level of competition in the market. That’s why there’s been the support for small, new companies to join the market, offering good service and competitive prices.
“Ofgem reports there were 64 companies competing in the domestic energy market in October 2019 and the new companies had taken about 30% of the gas and electricity markets from the big six.
“Consumers have been encouraged to switch energy providers to get a better price, but good service and the basics like accurate information are important too.
“This is particularly true for companies like Ovo who acquired customers from other companies that left the market. Which? recently rated many of the newer firms more highly than the big six for customer service, but the new set of companies who lead our energy market need to match competitive prices with accurate information and good service.”
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