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UTILITY Week 20 05 16

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UTILITY WEEK | 20TH - 26TH MAY 2016 | 27 Customers Analysis O fgem chief executive Dermot Nolan recently gave a stark warning to energy suppliers to "grow up" and win customer trust and recent fines handed down to those that have failed to meet stand- ards in service delivery show the regulator is bearing its teeth more than ever as it fulfils its remit for customer protection. The latest example of this assertive regu- lation comes in the form of an £18 million penalty for Scottish Power, and if we look back over the past 13 months we can see it's been a record-breaking year for fines. Npower: £26m In December 2015 Npower was hit with a record £26 million customer redress pack- age for billing and customer complaint handling failures. The supplier's problems began when it introduced a new IT system four years earlier that resulted in more than 500,000 late or inaccurate bills. This was fol- lowed by more than two million complaints, which the company struggled to effectively or promptly resolve. Npower also faced a ban on proac- tive domestic sales and advertising until its targets for improvements to its billing and customer service were met. This threat still stands, but the supplier insists it has reduced complaints by nearly 70 per cent since the beginning of 2015 as part of a pack- age of measures agreed with Ofgem. Npower has got a recovery plan in place to help it claw back consumer trust while also making essential cost savings, which are required aer the supplier reported heavy financial losses in March. The plan will see Npower reduce the number of direct and indirect employees by 2,400, reducing the number of sites or stopping some energy ser- vices and improving customer service. Scottish Power: £18m Most recently, in April 2016 Scottish Power was ordered to pay £18 million aer an investigation by Ofgem found the supplier was not treating customers fairly. The supplier received more than 1 million complaints between June 2013 and December 2015 because of a new IT system that resulted in unacceptably long call waiting times. The money will be paid to vulnerable Scottish Power customers who were affected by customer service issues (up to £15 mil- lion), and the remainder will go to charity. Since the investigation, the average call waiting time, rate of abandoned calls and the number of Ombudsman cases have all more than halved, and the number of late bills has fallen by 75 per cent. Eon: £7.75m and £7m In April 2015 Ofgem ordered Eon to pay £7.75 million for overcharging customers follow- ing a price hike, and wrongfully imposing exit fees on customers who opted to leave the supplier. This was followed by a £7 million fine in November 2015 for its failure to supply enough smart meters to its business customers. Some of the £7.75 million was used to repay customers and the rest paid to Citizens Advice to sup- port the organisation in its efforts to help vulnerable customers. Eon also only managed to deliver smart meters to less than 65 per cent of its relevant business custom- ers since 2009 and money from the second fine will go to the Carbon Trust. The company could also be set to face a further £7 million penalty and a sales ban if it does not meet new smart meter targets agreed with Ofgem. National Grid: £3m and £2m National Grid agreed to pay £3 million in March 2016 to fuel poverty charity National Energy Action aer not meeting its gas repair targets for the second year running. National Grid's gas distribution arm missed the target for carrying out non-urgent repairs on three of four of its distribution networks. The firm was also hit with an additional £2 million fine for missing its customer sat- isfaction targets across all of its distribution businesses. The regulator said National Grid recog- nises it did not have "proper management processes in place" to meet the targets, but was adamant that the failure did not put any lives at risk. National Grid was the only gas distribu- tion network to miss the targets and the fines come aer an announcement that it was planning to sell a majority stake in gas distri- bution businesses. BES: £980,000 Business energy supplier BES suffered the blow of a £980,000 fine in November 2015 for customer service failures between June 2010 and July 2015. Of that sum, £310,000 was returned directly to affected customers and the remaining £670,000 went to Busi- ness Debtline, a debt advice charity. Ofgem found that BES had failed to fully explain important details of custom- ers' contracts, including pos- sible termination fees, price reviews during their con- tract and increased standing charges for not using a mini- mum amount of energy. Since the majority of BES's customers signed four or five-year contracts, Ofgem considered these omissions to be par- ticularly serious. The escalation in the size of the penal- ties being imposed by Ofgem has been called "remarkable" by global investment bank- ing firm Jefferies. The firm highlights that between 2013 and 2015, the sum of all the penalties imposed by Ofgem was £46.7 mil- lion, three times the figure for the previous two years. So far in 2016, Ofgem has already imposed £47 million of penalties as the regu- lator clamps down on failings in an attempt to whip the industry into shape. Ofgem's direction of travel is clear, and with the Competition and Markets Authority expected to ratify its proposed remedies for the energy market next month, Ofgem will be given a ra of new responsibilities and sticks with which to beat the industry. Energy companies have been warned. Ofgem wields a big stick Over the past 13 months the regulator has imposed record fines on companies found guilty of bending or breaking the rules, and it's a tough regime that looks set to continue, says Saffron Johnson. £47m Total fines levied on energy companies in 2013 and 2014

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