Our response to Ofgem consultation on allocation of voluntary redress payments

25 August 2016

In June this year, Ofgem launched a public consultation on the 'allocation of voluntary redress payments in the context of Enforcement cases'.

'Voluntary redress payments' are levied on energy companies when Ofgem decides there is sufficient evidence of poor practice, such as for inaccurate billing, bad customer service or failing to meet energy saving targets. Instead of a formal ‘fine’ (which would pass straight to HM Treasury), these redress payments are given to charities to support schemes which help vulnerable households. The sums involved are substantial. In 2014 and 2015, a total of £73.5m of redress payments was passed to a number of different charities and Ofgem reports that, so far, the resulting schemes have benefited 223,000 vulnerable consumers.

The purpose of the consultation is "to make sure that these payments deliver maximum benefit for Great Britain’s energy consumers" and to consider "options for improving [Ofgem's] current allocation process". Currently, the arrangements have been somewhat ad hoc with significant influence given to the ‘guilty’ energy supplier to select the recipient charities and set priorities for the scheme. Ofgem is minded to change this arrangement by introducing a more formal and transparent arrangement, including decision-making which is independent of the energy suppliers.

CSE's response to the consultation was prepared by Chief Executive Simon Roberts and can be downloaded here.

Simon explains our main points: “This is a very welcome consultation and we hope Ofgem will follow through on its preferred option of setting up a system which is both more clearly structured and beyond the influence of the errant suppliers.

"We are particularly keen to see that Ofgem sets out clearly the sorts of benefits such schemes should be delivering for existing and future vulnerable households – we’ve made a detailed suggestion on this in our consultation response. And we think Ofgem, as the protector of consumer interests, should appoint directly the panel of decision-making experts which the scheme needs, rather than out-source that key responsibility to a fund administrator.

"We also believe there should be a sustained programme of effective monitoring and evaluation to ensure the new process has learning and continuous improvement built in from the start so we get to know more about scheme impact and what approaches work best.”

The consultation responses will help Ofgem decide on the best process to put in place for the allocation of any future voluntary redress payments.

Allocation of voluntary redress payments in the context of enforcement cases: Consultation Response by Centre for Sustainable Energy

Photo © Jaggery and licensed for reuse under Creative Commons 

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