Ofgem has looked into how energy companies handle direct charges, finding evidence that customers were being treated badly. It named a group of suppliers where it had identified “moderate to severe weaknesses” – Ecotricity, Good Energy, Green Energy UK, TruEnergy, Utilita Energy and UK Energy Incubator Hub, which ceased trading. The regulator said it found failings ranging from “poorly documented or embedded processes, weak governance and controls, to a general lack of a structured approach to setting customer direct charges”. Ofgem is concerned that these issues could lead to direct charges being incorrectly defined or not reviewed regularly, which could cause large credit balances or debt to build up, depending on whether the customer is underpaying or overpaying. It threatened to take action – which could include fines or a ban on acquiring new customers – if it does not see “rapid and significant improvement” from the companies. Business secretary Kwasi Kwarteng said: “If we don’t see improvement in two weeks, the regulator could issue fines and enforcement orders.” The findings come as consumers battle soaring household bills, which are expected to top £3,000 a year this winter. Ofgem chief executive Jonathan Brearley said: “We know how difficult it is for energy customers at the moment, so it’s important that the amount they pay each month in direct charges is right so they can manage their money. “Suppliers must do all they can, especially during the current gas crisis, to support customers and recognize the significant concern and worry that an increase in direct charges can cause.” The energy market was in turmoil last year as a combination of the industry’s price gap and rising wholesale costs pushed nearly 30 suppliers out of business. Ofgem is trying to prevent this from happening again by studying the financial resilience of energy suppliers and market mechanisms. It also named a group of suppliers where it had found “minor weaknesses”, including a “lack of documented policies or guidance for staff”. That group consisted of Bulb, now in taxpayer-funded administration, E.ON, Octopus Energy, Outfox the Market, Ovo, Shell and Utility Warehouse. British Gas, EDF, ScottishPower and SO Energy had “no significant problems” in handling customers’ direct charges, the watchdog found. The review found that charge levels for customers on standard variable tariffs rose by 62% on average between February and April, mainly due to rising gas costs. Ofgem said it had asked suppliers to check the accounts of all customers whose direct debit had risen by 100% or more. Doug Stewart, Chief Executive of Green Energy UK, said: “Ofgem has highlighted areas where we can make improvements and we are already taking action to address these areas. However, I believe that given the challenging state of the market, Ofgem needs to stand up to striking suppliers like us who have survived the market collapse and [are] we do our best to help customers.” Utilita said it was “shocked and disappointed by Ofgem’s decision to name and shame suppliers at this time” and disagreed with the regulator’s categorisation. Subscribe to the Business Today daily email or follow Guardian Business on Twitter @BusinessDesk A Good Energy spokesman said: “Ofgem only raised one concern about the governance of direct debit. It is related to internal documentation and we are taking swift action to address it.” TruEnergy said it “welcomes stricter regulations from Ofgem and is working with the regulator to demonstrate full compliance with all areas of its supplier license conditions”. Ecotricity, whose founder Dale Vince – the chairman of Forest Green Rovers football club – put the business up for sale in April, saying he wanted to “pass the baton”, has been contacted for comment.
