Utility Week

The Month in Review UTILITY WEEK | DECEMBER 2022 | 7 Ofgem provisionally approves £426m of SoLR levy claims Ofgem has provisionally approved more than £426 million of Last Resort Sup- ply Payment claims by Suppliers of Last Resort (SoLRs). They largely con- sist of true-up claims by companies which had pre- viously received approval to claw back around £1.8 billion of SoLR costs as part of a temporary expe- dited process launched by the regulator last year fol- lowing a ra‚ of supplier failures. Last Resort Supply Pay- ments allow companies to recoup otherwise unre- coverable costs incurred by becoming an SoLR, including wholesale costs, credit balances and work- ing capital. The payments are made by electricity and gas distribution net- works, which then recoup the costs through their charges. The temporary pro- cess introduced by Ofgem last year applied to SoLRs appointed a‚er 1 Sep- tember 2021, which were allowed to submit initial claims for costs incurred prior to December 2021 and later make true-up claims for any additional costs. A‚er approving almost £1.8 billion of initial claims in December last year, Ofgem has now issued its minded-to decisions on a number of true-up claims, as well as several new claims for SoLRs appointed prior to the introduction of the temporary process. Seven companies – British Gas, Eon Next, EDF, Scottish Power, Shell, Octopus, and Utilita – made claims for costs incurred in taking on the customers of 23 failed sup- pliers, collectively request- ing almost £598 million. In its minded-to deci- sions, Ofgem made deduc- tions of more than £171 million, provisionally allowing the SoLRs to claim back more than £426 million of costs. Energy suppliers ordered to improve treatment of vulnerable customers Ofgem has ordered a number of energy suppliers to improve the way they deal with vulnerable customers following a "deep dive" into their practices. The Market Compliance Review explored how companies treat customers in vulnerable situations and rated them as having minor, moderate, severe or no material weaknesses. Five companies – Good Energy, Outfox, So Energy, TruEnergy and Utilita – were identified by the regulator as having severe weaknesses. Another five companies – E (Gas & Electricity), Ecotricity, Green Energy UK, Octopus, and Shell – were found to have moderate weakness, and seven – British Gas, Bulb, EDF, Eon, Ovo, Scottish Power, and Utility Warehouse – were found to have minor weaknesses. Since receiving their indicative ratings in October, Ofgem said suppliers have "engaged positively with the process" and are taking "swi‚ action" to make the neces- sary improvements. Nevertheless, the regulator's director of retail, Neil Lawrence, said the "robust review" highlighted the need for suppli- ers to do more to help consumers, stating that "we've seen a number of failings across the board which need to be urgently addressed". Shortly before the release of the find- ings, Ofgem chief executive Jonathan Brearley told a conference in London that the retail market needs a new model that, among other things, acknowledges that "customers switching between sup- pliers will not play the role historically hoped for". Brearley said the Market Compliance Reviews the regulator is conducting represent part of its shi‚ away from reactive compliance and enforcement actions focused on the worst cases towards proactive assessment of company performance. He also welcomed the government's extension of the Energy Price Guarantee until 2024, saying this "gives us space to rethink the enduring model for pricing regulation that we need inside the retail market". However, in a recent report the House of Commons Public Accounts Committee raised concerns over Ofgem's shi‚ to proac- tive "bank-style" regulation of retailers, saying it is "not convinced" the regulator has the necessary skills and capabilities. The Month in Review £6.5bn Estimated cost to the taxpayer of taking Bulb into special administration, according to the Office for Budget Responsibility. 19% of MPs believe their constituents would support a new onshore wind farm in their area, according to a poll by YouGov. EA wastewater probe finds 'serious' non-compliance Twelve months since launching a major probe into the operation and management of wastewater treatment works, the Environment Agency (EA) has revealed that the first phase has uncovered "widespread and serious non- compliance" with regulations by all water and sewerage companies. More than 2,200 sites are being investi- gated by the EA to ascertain the extent of any non-compliance with environmental permit conditions related to flows treated and dis- charged from wastewater treatment works into English waterways. Reflecting on the ongoing process, the regulator said: "We expect water and sewerage companies to take immediate action to bring their operations into compliance." The EA said the probe, which is being con- ducted alongside an investigation by Ofwat, is the largest ever undertaken by the agency and is "working to hold the water industry to account on a scale never seen before through increased monitoring and ongoing enforce- ment action when laws are broken". It has so far analysed more than two billion data points, which it said would "build a pic- ture of the potential scale of non-compliance". The next stage will explore potential permit breaches based on the results of the data.

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