The regulator is reviewing the amount gas and electricity suppliers are increasing direct debits as a result of the huge 54 percent surge in the energy price cap, which came into force on April 1. Several suppliers have collapsed under the weight of mounting pressure, which has seen around 4.3million customers moved to another firm. Ofgem chief executive Jonathan Brearley wrote in a blog post: “We are also seeing troubling signs that some companies are reacting to these changes by allowing levels of customer service to deteriorate.
“Ofgem collects and reviews a range of metrics directly from suppliers, in addition to information from consumer groups, NGOs and members of the public, and this has highlighted a series of issues which we find concerning and are investigating further.
“For example, concerns have been raised that some suppliers may have been increasing direct debit payments by more than is necessary, or directing customers to tariffs that may not be in their best interest.
“We have also seen troubling stories about the way some vulnerable customers are being treated when they fall into difficulties.”
He continued: “When households are facing massive increases in their energy bills, it is particularly important that suppliers are held to account and bad practices are addressed quickly.
“In particular, now more than ever we need suppliers to stick to the requirements in their licence on how they work with customers in financial distress.
“The challenges that our customers face today should be a call to action for energy retailers to improve things, both in the way they do business to ensure it is resilient, and in the way they treat customers.
“To ensure this happens, today Ofgem is setting out two areas where we are working to tighten and strengthen our supervision of the market.”
The first will see Ofgem commission a series of “Market Compliance Reviews” from suppliers to ensure they are fulfilling their licence conditions.
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During the current gas crisis, the energy regulator said one of the root causes of the failures of many of those suppliers who crashed out of the market was linked to the way they managed the money paid to them by customers.
But Mr Brearley said some suppliers “have been using these balances to prop up their finances, enabling them to follow more risky business models with reduced financial resilience and higher likelihood of failure”.
He warned if a supplier becomes insolvent, the cost of replacing those balances has to be picked up by other suppliers and, more importantly, energy customers.
The Ofgem boss said: “Customer credit balances should only be used to reconcile bills, not as a source of risk-free capital.
“That is why we are considering options to ring-fence credit balances and renewables payments in such a way that they would be protected if a supplier fails.”
Mr Brearley concluded his blog post with a final warning for energy suppliers.
He said: “Ofgem is clear in its purpose: to protect consumers’ interests.
“In a difficult and volatile market, that means it is imperative that we scrutinise and hold companies to a higher standard.
“Where energy retailers fail to act responsibly, we will take tough and decisive action using the full range of regulatory tools at our disposal, including punitive measures if necessary.
“We are also working with Government to consider what additional powers may be needed so that we can continue to protect consumers in a rapidly changing market.”
