Ofgem recently concluded its compliance engagement with Green Star Energy, the trading name of Hudson Energy Supply UK Ltd for domestic supply, on its compliance with Standard Licence Condition 0 on Standards of Conduct, and Standard Licence Condition 7.7, on information for customers about deemed contracts. Following this engagement, Green Star Energy has committed to (1) financially compensate customers; (2) pay £30 goodwill to each customer affected and (3) pay an appropriate voluntary contribution to the Energy Industry Voluntary Redress Scheme.
Under Standard Licence Condition 0 suppliers must ensure they treat customers fairly, provide information which is sufficient to enable customers to make informed choices about their energy supply, ensure that they have customer service arrangements in place which make it easy for a domestic customer to contact them, and to act promptly and courteously to put things right when they make a mistake. Standard Licence Condition 7.7 requires suppliers to take all reasonable steps to provide customers with the principle terms of their deemed contract and notice that contracts with different terms may be available and of information about how such contracts may be obtained, commonly referred to as ‘welcome packs’.
In August 2019, following engagement as part of its compliance monitoring, Ofgem became aware that Green Star Energy did not update its change of tenancy records in a timely manner between August 2018 and February 2019 or send welcome packs to new tenants, as required by its licence. This failure had the effect that tenants may not have been aware of who was supplying their energy or that they were on a potentially more expensive deemed tariff, that contracts with different terms may be available, and importantly, it prevented customers from switching to a better deal.
We engaged with Green Star Energy and assessed the extent and impact of this failure on the customers it affected and any gain to Green Star Energy. Green Star Energy was aware of the issue and had previously reviewed its systems and addressed the systemic deficiencies that led to the issues; however, Green Star Energy had not reported the matter to Ofgem nor had it taken steps to compensate the affected customers.
This is our fourth significant compliance engagement with Green Star Energy since March 2018. This includes an engagement with the supplier regarding an identical issue, at the same time as this issue was extant. However, Green Star Energy, although aware of it, did not self-report the issue at that time, despite the issue impacting a significant number of customers.
Green Star Energy identified 7,519 customers who had not received welcome packs within a reasonable time and had been on potentially more expensive contracts. The supplier is in the process of paying compensation of £30 to each affected customer in recognition of poor customer service and the fact that these customers did not receive welcome packs. Of these customers, 2,172 had attempted to switch tariff/supplier before receiving their welcome packs but were unable to do so. Green Star Energy is in the process of paying compensation to each such customer individually, being the difference between the deemed tariff the customers were put on by Green Star Energy and the cheapest available tariff on the market. In respect of the other 5,347 customers who did not take steps to switch tariff/supplier, Green Star Energy is in the process of paying further compensation of £4 to each of these customers representing the average gain per customer by Green Star Energy. Any compensation/redress payments which remain unpaid/uncashed after 3 months will be paid to the Energy Industry Voluntary Redress Scheme.
Green Star Energy has also committed to an additional voluntary contribution of £389,849 to the Energy Industry Voluntary Redress Scheme in recognition of its failings. This gives a total redress of £750,000.
Key lessons learned
It is very important that customers always receive timely information that promotes their positive engagement, so they can make informed choices about their energy supply. When suppliers start providing energy to new tenants in a property they must:
- Promptly set up customer accounts and ensure that their records are up to date with the correct customer details;
- Make it easy for customers to contact them; and
- Provide information to customers about deemed contracts.
All potential breaches must be self-reported in a timely manner.
In determining the appropriate action against supplier non-compliance, we take into account whether suppliers self-report, the extent of their engagement with us through the compliance process and their past performance and behaviours.