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OFGEM

Ofgem closes compliance engagement with iSupply in relation to incorrect charges for some customers and inadequate Priority Services Register registration

Compliance engagement results in iSupply paying a £1.5 million package (of refunds, goodwill and redress) for incorrectly charging customers and inadequate Priority Services Register registration. 

Ofgem has closed compliance engagement with iSupply related to a number of failings impacting over 115,000 customers between 2013 and 2019. These were:

  1. Incorrect charges applied during contract renewals: iSupply failed to maintain some customers’ existing tariff rates when switching to a different supplier or iSupply tariff following a price rise notification or the end of a fixed term tariff
  2. Incorrect VAT application: iSupply applied incorrect VAT rates to certain charges levied on customers.
  3. Incorrect cheapest tariff messages appearing on customer communications
  4. Incorrect recording of customer status: affecting the Priority Service Register and vulnerable customers
  5. Misallocation of payments: several customer payments were allocated to the wrong accounts

Ofgem considered that iSupply had insufficient governance and processes in place to prevent and swiftly address non-compliance, which resulted in a range of issues that ultimately caused consumer harm. The supplier has confirmed that it has improved its governance and processes, and that it has compensated and refunded all customers that suffered detriment as a result of its non-compliance.

As part of its actions to address customer detriment iSupply has agreed a redress package across all areas of £1,500,000; made up predominantly of refunds and goodwill payments directly to affected customers.

The size of the redress package takes account both the nature of the errors and the supplier’s positive behaviour during the compliance engagement. This includes the fact that iSupply self-reported some of the errors, the remedial actions taken by its senior management and its cooperative attitude. The redress comprises:

  • Direct customer refunds totalling £809,220.41
  • Customer goodwill payments totalling £595,290
  • A payment into the Voluntary Redress Fund totalling £95,489.59.

Key messages to suppliers

  • Ofgem expects suppliers to have robust governance and risk management processes in place with the ability to anticipate, escalate and mitigate risk of consumer harm.
  • Suppliers should implement sustainable changes and fixes to systems and processes rather than relying on manual workarounds.
  • Ofgem’s Enforcement Guidelines set a clear expectation that licensees should promptly self-report potential breaches to the regulator.
  • Ofgem relies on a range of information to support its compliance work, including information disclosed by whistleblowers. Ofgem takes disclosures provided by whistleblowers seriously, and encourages those with genuine concerns about wrongdoing, risk or malpractice to come forward with relevant information.

Further detail on each area

Incorrect charges applied during contract renewals:

  • Following an internal review of its renewal processes, iSupply self-reported in December 2019 that it had not correctly protected 72,331 customers’ tariffs where customers decided to switch tariff or supplier when they reached the end of a fixed term contract or the charges for their Standard Variable Tariff (SVT) increased.
  • The Electricity Supply Standard Licence Conditions (specifically SLC 23.6) requires suppliers to keep customers who are in the process of switching tariff or supplier after the end of their fixed term contract at the rates of their old contract. SLC 24.9 does the same for customers who switch tariff or supplier in response to a price increase of their SVT.
  • iSupply has now rectified the issue and has provided refunds and additional goodwill payments to customers who were overcharged totalling £726,960.52 (an average of £10.05 per customer) and £482,245 respectively.

Incorrect VAT application:

  • Intelligence from September 2019 indicated that iSupply was not charging VAT correctly, causing some customers to be overcharged. Following their investigation into the matter, iSupply confirmed that 44,139 customers were impacted of whom 20,981 were overcharged
  • iSupply confirmed that because of a system limitation, applying VAT at rates other than 5% required a manual intervention, and that this intervention was not correctly applied to all customers.
  • iSupply has now rectified the issue and has provided both refunds and additional goodwill payments to customers totalling £75,301.81 (an average of £1.85 per customer) and £105,165 respectively.

Incorrect Cheapest Tariff Messages (CTM):

  • iSupply self-reported in September 2019 that 1,518 customers had received an incorrect CTM within their communications due to a system error, potentially resulting in these customers choosing a suboptimal tariff.
  • SLC 31F.5 obligates suppliers to provide consumers with Switching Information, including (under SLC 31F.6) a Cheaper Tariff Message, at Key Prompt Points when a consumer might benefit from this information. iSupply has worked with its system provider to resolve the problem and has provided refunds and additional goodwill payments to customers totalling £5,606.15 (an average of £4.18 per customer) and £7,590 respectively.

Two further issues also formed part of this compliance engagement:

Incorrect recording of customer status on Priority Services Register (PSR): In September 2019, we were made aware of issues with iSupply’s process in maintaining its PSR. iSupply failed to remove 854 customers from the PSR and therefore, during reporting cycles to the regulator from 2016 to 2019, iSupply provided incorrect numbers of PSR customers. iSupply has rectified the issue and no customer detriment was caused.

Misallocation of payments: In December 2019, iSupply self-reported that nine customers’ payments had been allocated to an incorrect account. The problem has been resolved and iSupply is providing both refunds and additional goodwill payments to customers totalling £1,351.93 (an average of £150 per customer) and £290 respectively.