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Ofgem closes compliance engagement with Bulb

Ofgem closes compliance engagement with Bulb, in relation to switching errors, incorrect charges to some customers and incorrectly removing consumers from the Priority Services Register of Distribution Network Operators with £1.76m package.

Ofgem has closed compliance engagement with Bulb relating to three separate non-compliance issues, impacting 61,794 consumers between 2017 and 2020. These were:

  1. Some Restricted Meter Infrastructure1 (RMI) consumers were unable to switch to Bulb due to an error in process. This meant that some consumers missed out on savings they would have made by switching to Bulb, after requesting to make the switch. This issue occurred between June 2017 and April 2020 and affected 3,888 consumers.
  2. Some RMI2 customers were charged multiple standing charges, one for each MPAN at the property. Bulb should not have charged such multiple charges because it has an obligation to offer its RMI customers all Relevant Tariffs. By charging multiple charges to some RMI customers Bulb was not doing so and was therefore in breach of this obligation. This occurred between the end of 2017 and June 2020, affecting 11,458 customers.
  3. Vulnerable consumers were removed from the Priority Services Register for certain Distribution Network Operators’ (DNOs’) records due to an error in Bulb’s data-flow process. While Bulb added these consumers to their own Priority Services Register, they were removed from the DNOs’ PSRs. This issue occurred between March 2019 and January 2020, affecting 46,448 consumers, when Bulb identified, fixed and reported the issue this to Ofgem.

Ofgem considers that Bulb had insufficient processes in place to review and prevent non-compliance, which contributed to these compliance failings, and led to consumer harm. The supplier has confirmed that it has improved its governance and processes, and that it has offered compensation to all consumers who suffered detriment as a result of its non-compliance and has refunded those consumers who were overcharged. Bulb dealt with these issues, including implementing fixes and engaging constructively with Ofgem during the disruption caused by COVID-19.

As part of its actions to address customer detriment, Bulb has agreed a redress package across all areas of £1,757,837; made up predominantly of compensation to affected customers.

The redress package takes account of both the nature of the errors and the supplier’s positive behaviour during the compliance engagement. This includes the fact that Bulb self-reported the PSR removal error and has promptly taken remedial actions. The redress comprises:

  • Customer goodwill payments totalling £901,035
  • Direct customer refunds totalling £699,452
  • A payment into the Energy Industry Voluntary Redress Fund totalling £157,350

Key lessons learned

  • As suppliers grow, some new obligations apply3. Existing policies and procedures may therefore need to be reviewed and updated. In this case, when the supplier grew to having more than 50,000 customers, it failed to correctly take account of new measures that applied to it and make all Relevant Tariffs available to RMI customers. This led to some RMI customers being overcharged. Suppliers should ensure they are meeting all their obligations, including those that apply as they grow and any new measures that come into force. Suppliers must also be vigilant and ensure customers are charged correctly for the energy they use.
  • Suppliers must have robust governance in place to regularly review processes to identify gaps and take action where necessary. The supplier did not identify that transfers were being disproportionately objected to for a specific group of consumers (those with RMI). Individual concerns about objections were looked into, but this was not investigated at an aggregate level. Suppliers should be able to spot such trends, or spot an individual error which would likely be systemic, and make necessary improvements.
  • Suppliers must be aware of and understand new and amended legislation, and ensure this is considered and applied to their processes. In this case, a change to requirements for RMI customers was not implemented correctly, which resulted in some RMI consumers being overcharged.
  • Suppliers must have robust processes in place to regularly check their internal systems are suitable and fit for purpose, to avoid any IT failings. This includes ensuring the correct codes and communications are sent to all third parties, particularly information concerning Priority Services Register consumers where data must be accurate at all times.

Further detail on each area

Restricted Meter Infrastructure (RMI) switching objections

Following information received in February 2020, it was identified that, due to an incorrect process, Bulb had not been correctly submitting switch requests to suppliers. This affected customers with a Restricted Meter where there is more than one electricity meter point (MPAN) at the property, referred to as related meters. Between June 2017 and March 2020, this issue affected some consumers with differently formatted addresses in the industry switching database (ECOES). Bulb only requested one MPAN, instead of the correct number for the property. The consumers’ existing supplier objected to the switch, as Bulb did not provide details of the second MPAN to complete the switch. This prevented some switches from being completed.

The Electricity Supply Standard Licence Conditions (“SLCs”) (specifically SLC 14A) require suppliers to complete customer transfers within 21 days and SLC 14A.7 specifies an obligation to improve switching systems. Bulb failed to do this by not taking the steps necessary to facilitate a switch for these related MPAN consumers and not reviewing and improving its processes.

Once this issue was brought to Bulb’s attention, Bulb implemented a fix in early April 2020. It has contacted all consumers affected to offer a goodwill payment to all consumers affected and a payment to the Voluntary Redress Fund (VRF) in respect of this failing, totalling £155,520 and £35,000, respectively.

RMI multiple standing charges

Ofgem received information in February 2020 indicating that Bulb was incorrectly charging some RMI customers multiple standing charges, after customers requested a single tariff rate, causing some customers to be overcharged.

The SLCs (specifically SLC 22G.1) require all suppliers with more than 50,000 customers to offer Relevant Tariffs (as defined in the SLCs) to customers with a relevant restricted meter.

Bulb failed to do this because, by charging multiple standing charges, it was not offering the same tariffs to its relevant restricted meter customers and therefore was not offering Relevant Tariffs to RMI customers. Customers should not have to pay multiple standing charges for a relevant restricted meter where they have requested a single rate tariff.

This issue had been ongoing since 2017, when Bulb first exceeded 50,000 customers and were obligated to offer Relevant Tariffs to customers with relevant restricted meters. This occurred because Bulb incorrectly interpreted SLC 22G.

The issue was rectified in May 2020 and Bulb has provided refunds and additional goodwill payments to customers who were overcharged, totalling £1,374,902 in recognition of the seriousness of the issue, Bulb has also made a payment of £35,000 to the VRF.

PSR consumers’ removal from DNO register

In February 2020, Bulb self-reported to Ofgem an issue affecting its Priority Services Register (PSR) customers. The PSR is a service provided by all suppliers and network operators to prioritise the needs of Domestic Customers in a vulnerable situation (as defined in the SLC). Between March 2019 and January 2020 Bulb sent incorrect D0225 data flows to Distribution Network Operators (DNOs). Instead of providing disclosure codes (codes detailing the nature of a customer’s vulnerability), Bulb sent a PSR removal code, which caused DNOs to remove these customers from their PSR. The incorrect codes affected 46,448 PSR customers, which accounted for over 92% of customers on Bulb’s PSR system. Despite this mistake, Bulb continued to offer additional services to all customers on its PSR.

Customers on the PSR are entitled to additional services, including advance warning of a planned power outage and prioritised re-connection during a power outage. Bulb established that 933 customers removed from the PSR suffered a short power outage during the time they were not on the DNO register.

The SLCs (specifically SLC 26.1) require suppliers to develop and maintain a PSR for its Domestic Customers. The Standards of Conduct (SLC 0.3) also require suppliers to apply these in a way which takes account of any Vulnerable Situation of a consumer. Due to the error in its processes, Bulb failed to have a system in place that provided the correct PSR information to relevant DNOs.

Bulb corrected the PSR registrations of impacted customers in February 2020. It has now compensated the 933 customers who suffered a power outage, including a payment into the VRF for those who could not be identified, totalling £107,325. Bulb has also made a payment of £50,000 to the VRF in recognition of the seriousness of the error.

[1] A restricted meter allows for electricity customers to be charged lower rates for electricity used at times with reduced overall demand.

[2] Applies to relevant restricted meter infrastructure consumers as defined by CMA Energy Market Investigation (Restricted Meters) Order 2016.

[3] Further information can be found in the Guides to the Supply Licences.