Utility Week

Customers 24 | 7TH - 13TH FEBRUARY 2020 | UTILITY WEEK Analysis O vo's dramatic ascension to the top tier of UK energy retailers, with the acqui- sition of SSE's 3.5 million customers, arrived with much fanfare. The firm, founded by former City trader Stephen Fitzpatrick, signalled its ambition by combining the official announcement about the deal with the unveiling of its Plan Zero. This set out its vision to enable its cus- tomers (including those transferring from SSE) to eliminate their household emissions by 2030. The deal was nothing short of transforma- tive, eliminating the term "big six" and – alongside the rapid expansion of the likes of Bulb and Octopus – signalling that the disruptors had become mainstream. However, last week the company was forced onto the back foot a'er Ofgem released the damning results of an investi- gation into failings in communication and billing over a five-year period. 'Poor attitude' Ofgem's accompanying report brands the company as "reckless" and its senior management as displaying a "poor attitude to the company's regulatory obligations", leading to a corporate culture in which these requirements were viewed as "optional or unimportant". Hundreds of thousands of custom- ers received inaccurate bills, but the most worrying accusation is that the management of Ovo did not see the rectification of these issues as a priority and that "efforts were instead concentrated on other areas of the business". This goes to the heart of the suspicions and fears around the rapid growth of the challenger brands. In their thirst for growth, are the basics of customer service and accurate billing being given due attention? If this impression is allowed to go unchecked, it may be incredibly damaging to the energy retail sector as a whole. The market coup being conducted by the disrup- tors has the potential to breathe new belief into a customer base that had become jaded in their expectations of the big six. As the headlines about Ovo filter through, there is a temptation to think "here we go again". Inaccurate statements The details of the investigation will not have made comfortable reading for the senior team at Ovo. It sets out how 500,000 customers were sent inaccurate annual statements between July 2015 and February 2018, with many not actually receiving a statement. Around 10,000 customers were not given statements of renewal terms when tariffs were ending or were not moved to new tariffs when their existing ones ended. Meanwhile, 17,500 prepayment meter (PPM) customers were not initially charged at the correct regional level of the PPM cap; a further 8,000 customers ended up paying above the level of the PPM cap due to Ovo not moving them to new tariffs when their current ones ended. Throughout the report, Ofgem highlights the concerns it had with Ovo's reaction to the mistakes it made and the impact it had on customers. One concern was the approach taken in issuing refunds to cus- tomers impacted by an issue regarding the estimation of bills in winter 2017. The supplier decided to write off bills where customers had been undercharged and had then switched away, as well as those still on supply who were undercharged by less than £100. However, Ofgem said Ovo decided to not proactively issue refunds/credits below £10, explaining that it did not believe it was an efficient use of resources to process 120,000 small value refunds/credits. The sup- plier instead proposed to use the money to write off the debts of former customers. Ovo did later issue refunds/credits below £10, but only to customers who requested it. Different place It should be stressed that these are legacy issues at Ovo and that the company is in a very different place in 2020 – with a hugely impressive senior team now assembled. Still, the reaction to Ofgem's announce- ment was curious. While a blog on the com- pany's website did unreservedly apologise to customers, the official statement did not include any such contrition, simply saying Ovo "holds itself to high standards, but we have not always got it right". Bizarrely, the announcement goes on to boast that during the period covered by the investigation, Ovo was voted Uswitch Supplier of the Year four out of five times. Ovo's bad week comes amid wider specu- lation about how sustainable the business plans of some of the other challenger brands are. Bulb shrugged off a £129 million loss for financial year 18/19 with disarming non- chalance when it was revealed last month. Indeed, its chief executive and co-founder Hayden Wood decided that was the most appropriate moment to set out the group's ambition to grow to 100 million customers. We are currently waiting for the delayed accounts for several other new suppliers. Tonik Energy and So Energy have both applied to Companies House to file their accounts late a'er significant investments or deals. In the former's case this is understood to be further funding from existing backer Mitsui, which put in £10 million less than a year ago. And So Energy has signed a three- year deal for Axpo to become its sole energy supplier. Disruptors have been used to shake up the market but, as the dust settles around them, the next step is to back up their prom- ises that the disruptions they have wrought will be in the best interests of customers. Adam John, reporter, and James Wallin, digital editor, Utility Week The honeymoon is Ovo Ovo Energy has been hailed as a true disruptor of the energy retail market, but an Ofgem report has shown it struggled with the basics over a five-year period. Adam John and James Wallin investigate. "In their thirst for growth, are the basics of customer service and accurate billing being given due attention?"

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