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Busy week for OFGEM

Busy week for OFGEM

In a blistering decision against NPower, the energy regulator OFGEM yesterday announced a fine of £26m for wholesale failures in customer service. In addition, the regulator has threatened to ban the company from advertising or signing up new customers if it failes to pull up its socks in customer service. 

With less of a fanfare, the regulator also announced a settlement in the case against BES Commercial Electricity Ltd and Business Energy Solutions Ltd (together referred to as "BES")  who had failed to comply with the requirements of their gas and electricity supply licences and also the Consumer Complaints Handling Standards) Regulations 2008 (the CHSRs). BES had earlier agreed to a settlement of £980,000.

The day before, on 17th December, the regulator announced its settlement decision with E.ON UK Plc and E.ON Energy Solutions Plc in relation to supply of advanced meters for non domestic premises. The fine of £2 was in addition to the settlement of £7m imposed to pay the Carbon Trust for customer redress. A further £7m will be payable if the companies fail to hit their targets for installation of smart meters points by November 2016.

The new Enforcement Decision Panel which was established in June 2014 to take enforcement decisions on behalf of the Gas and Electricity Markets Authority. Previously, decisions were taken by non executive members of OFGEM.

The EDP was established to exercise the Authority’s statutory functions in enforcement decisions. These had been discharged previously by non-executive members of the Authority. It makes two types of decisions, Settlement cases, where a member of the panel chairs a committee including a senior partner from OFGEM and Contested Cases where a panel of three members is convened to decide the case as a tribunal. 

The 2014 report showed that there had been 7 cases which were considered in the light of the 2003 penalties policy, and involved a number of complex issues. Fines imposed ranged from £54,000 to £24m imposed on Drax, published on 16th March 2015.

These functions are: issuing a settlement mandate (in which a settlement committee consists of one EDP member and one senior partner appointed by the Authority), and making decisions over contested cases.

Between August 2014 and March 2015, a settlement committee issued a mandate for settlement in 11 cases, under which the Ofgem enforcement team was authorised to settle cases with companies, provided that the companies admitted breaching the relevant rules.

In all cases, a settlement was reached within the early settlement window, an interim penalty notice and press release issued. Eleven of those cases have now had the final penalty notice published following public consultations.

There has been a lot of publicity given to the Community Energy Savings Programme (CESP) and Carbon Emissions Reduction Target (CERT) cases, in which payments ranging from £750,000 to £28,000,000 were agreed, most of which were discharged through consumer redress payments and the rest through penalties. 

The EDP has not been engaged in any contested decisions during the period.

The EDP has contributed to a number of enforcement policy discussions, including advising on the new enforcement guidelines, the new penalties policy guidelines, the consultation and subsequent guidelines on REMIT, principles based regulation, compliance policy and an internal consultation on how to handle criminal powers.

The cases included.

  • E.ON  where the penalty above was accepted after it incorrectly charged exit fees and/or overcharged customers following price rises. This was in addition to the approximately £400,000 E.ON had already paid back to potentially affected customers. 
  • UK Capacity Reserve who submitted inaccurate information when it applied to be part of 2014’s capacity auction. This resulted in the generator being banned from participating in the capacity auction for the next two years.

For any advice and assistance for issues like these please do call Jeremy on 0844 2722322 or submit a comment below. Jeremy will come back to you at the earliest convenience.

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