Ombudsman Services response to DECC s consultation

Transcription

1 Ombudsman Services response to DECC s consultation Proposed new power for Ofgem to compel regulated energy businesses to provide redress to consumers - July 2012

2 Ombudsman Services response to DECC s consultation: Proposed new power for Ofgem to compel regulated energy businesses to provide redress to consumers Author Mark Glover Status Final Date last revised (and reason) 02/07/12 Version number 0.7 Distribution LSS Purpose of the document Related documents Response of The Ombudsman Service Ltd (Ombudsman Services) 1. Summary 1.1 The Ombudsman Service Ltd is a company limited by guarantee (not-for-profit) that provides ombudsman services for the energy, telecommunications and property sectors, by appointment or approval from the relevant regulators. We provide dispute resolution and redress to domestic consumers and micro businesses. 1.2 The views contained in this consultation relate to the provision of redress to consumers if a breach of the regulations is found to have occurred; it does not deal with Ofgem s power to levy fines against energy companies who have been found to have breached the regulations. 1.3 Ombudsman Services considers that it is only right that, if there is a breach of the relevant obligations and consumers have suffered a loss, then Ofgem should have the power to ensure that appropriate redress is made to each individual who has been affected by the breach. However, we believe that if the proposal is adopted, Ofgem should consider whether a blanket compensation amount for every consumer or a proportionate remedy, subject to a threshold level, is appropriate. It seems unlikely DECC s Collective redress consultation July

3 that every consumer will be equally affected by a breach and, therefore, it would be unfair for there to be a single compensation rate, unless the effect is of a very low level. 1.4 It is important for Ofgem to ensure that compensation should be proportionate to the detriment suffered by consumers, as some may be more affected than others. It may be that Ofgem should consider bands of compensation levels, depending on the degree of the detriment. 1.5 Ombudsman Services usually considers complaints from individuals and is only in exceptional cases to consider class action complaints. DECC s proposal could therefore plug a gap if Ofgem has these powers. 1.6 Ombudsman Services has considerable experience in the field of dispute resolution. We would be happy to provide clarification on any point in this evidence or if there is any other way we can help, please contact the scheme. 2. Introduction 2.1 The Ombudsman Service Ltd is a company limited by guarantee that provides ombudsman services for the energy, telecommunications and property sectors, by appointment or approval from the relevant regulators. We provide dispute resolution and redress to domestic consumers and micro businesses. 2.2 Established in 2002, Ombudsman Services now has over 8,650 participating companies. During 2011/12 we responded to 203,148 contacts and resolved over 18,000 complaints. The company employs over 170 people and has a turnover in the region of 6.4 million. 2.3 Ombudsman Services is appointed by Ofcom and Ofgem to be the redress scheme for the communications and energy sectors. In the energy sector we have recently taken on the responsibility for complaints about feed-in tariffs, in addition to our existing role providing the alternative dispute resolution scheme for both energy suppliers and networks. The redress service we provide in property developed from appointment by the Royal Institution of Chartered Surveyors, followed by approval from the UK Office of Fair Trading to provide alternative dispute resolution services for estate agents. DECC s Collective redress consultation July

4 2.4 The service has recently been appointed as the Ombudsman and Investigation Service for the Green Deal. We are continuing to develop alternative dispute resolution for copyright licensing/collecting societies. With our sustainable funding model, independence and considerable experience we have the capacity to undertake further work. 2.5 To help level the playing field between consumers and companies, we have a contact centre which provides information and helps those who have difficulty in making a complaint. We achieve proportionality by providing alternative dispute resolution through different processes, from informal resolution to in-depth formal investigation. Our decisions are enforceable through the courts. 2.6 Our service is free to consumers and paid for by the participating companies under our jurisdiction by a combination of subscription and case fee. While we consult with the sector participants on our annual budget and business plan, the participating companies do not and should not exercise financial control over the company. Our governance ensures that we are entirely independent from the companies that fall under our jurisdiction. 2.7 Ombudsman Services welcomes the opportunity to comment on DECC s consultation to compel regulated energy businesses to provide redress to consumers. 3. General response to the consultation 3.1 Ombudsman Services consultation is divided into two; the first part provides a general response to the consultation and makes a number of general points about what DECC might wish to consider when establishing a redress scheme. The second part answers the questions that the consultation contained. 3.2 Ombudsman Services has a considerable amount of experience in operating the only redress scheme in the energy sector and in order to avoid confusion in the mind of companies and consumers, DECC should consider whether it is appropriate for there to be another avenue for redress. DECC s Collective redress consultation July

5 3.3 It is our view that the establishment of a similar scheme by Ofgem would be both confusing and a waste of resources. Proportionality 3.4 If the proposal to enhance Ofgem s powers to require individual compensation to be made is adopted, DECC should consider whether a blanket compensation amount for every consumer or a proportionate remedy, subject to a threshold level, is appropriate in the circumstances. It seems unlikely that every consumer will be equally affected by a breach and, therefore, it would be unfair for there to be a single compensation rate, unless the effect is of a very low level. Awareness 3.5 It is important for consumers to be aware that Ombudsman Services is available to deal with complaints associated with any effect of a company s breach of the regulations. Consumers should be advised of their right to take their complaint to the ADR scheme, whether it is: omission of that person from the group compensated; problems occurring during the compensation process; where there is an effect threshold, a dispute about materiality; or where there is no specified compensation level, a dispute about the fair amount. 3.6 It is likely that, in the absence of consumer awareness about the Ombudsman s availability, complainants would go directly to Ofgem, with the probable result that they would then be referred to the Ombudsman. Accessibility 3.7 It is important that awareness is coupled with accessibility. Ombudsman Services is already identified on electricity and gas bills and, despite more needing to be done, the number of energy consumers who used the service in 2011/2 (7,400 returned complaint forms), suggests that the service is easily accessible. Ombudsman Services makes provision for those who have language difficulties or have specific needs has a DECC s Collective redress consultation July

6 range of ways by which the complainant can interact with the scheme and uses plain, jargon-free language in information and reports: (a) Technology has a key role to play in raising the awareness of consumers, making it easier for them to engage with the ombudsman and making the process more time and cost-efficient and transparent. In April 2011, and in line with proposed European requirements, Ombudsman Services launched a new website through which complaints can be made. This will be further developed to allow complainants to make complaints and for companies to upload evidence and to track complaints to view progress. (b) The website also gives details of what we can and cannot do, information on how to complain, details of our process and timescales and what action we might take to put things right. (c) For those who do not use the internet, we supply leaflets about our scheme. These are written in plain English and are available in other languages and formats on request. Our enquiry officers are trained in collecting all the information necessary by telephone to capture the key elements of a complaint. (d) We provide translation services and support for those who are sight or hearing impaired. Redress 3.8 It is important for the redress available to be seen to be proportionate, fair and reasonable to both parties. Ombudsman Services already has a mechanism in place to ensure that, when the remedies are accepted by the complainants, they will be implemented by the company concerned, being enforced through the courts, if necessary. 4. Specific response to the questions 4.1 Below is Ombudsman Services response to the specific questions raised in the consultation. DECC s Collective redress consultation July

7 Q1. Do you agree that Ofgem should be able to order an energy business that is in breach of relevant obligations to make appropriate redress to consumers who have suffered a loss as a result of the breach? Yes. Ombudsman Services considers that it is only right that if there is a breach of the relevant obligations and consumers have suffered a loss, then Ofgem should consider whether a blanket compensation amount for every consumer or a proportionate remedy, subject to a threshold level, is appropriate in the circumstances. It seems unlikely that every consumer will be equally affected by a breach and, therefore, it would be unfair for there to be a single compensation rate, unless the effect is of a very low level. It is important that the level of redress is not seen as punishing the company but is set at a level that puts the customer in a position as if the breach had not occurred. When considering the appropriate level of redress DECC may also wish to make a specific provision for the award to cover the time, trouble and inconvenience suffered by the complainant. There is potential for confusion in the mind of the consumer between the responsibility of Ofgem and Ombudsman Services. What ever changes are made it is essential that DECC makes it clear the areas of competence between the two organisations one option may be to require the regulator to regulate and redress schemes to provide redress. Q2. Do you agree that Ofgem should be able to compel both licensed and licence-exempt energy undertakings to provide redress when they breach relevant obligations? Yes, both licensed and licence-exempt energy undertakings should be compelled to provide redress when they breach relevant obligations. Q3. Do you agree that Ofgem should be able to order compensation to be paid to other market participants, not just individual consumers? Where a breach has been established and there is evidence that there has been a loss, then Ofgem should have the power to be able to make an award on the DECC s Collective redress consultation July

8 basis of putting other market participants in a position as if the problem had not occurred. Q4. Do you agree that Ofgem should have discretion to decide what form of redress is appropriate to address the detriment caused by regulatory breaches? Yes, but it is important for Ofgem to ensure that compensation is achievable and proportionate to the detriment suffered by consumers, as some may be more affected than others. It may be that Ofgem should consider bands of compensation levels, depending on the degree of the detriment. Q5. Can energy businesses provide us with information about the administrative or other costs they anticipate they might face should Ofgem require them to provide redress to consumers? Ombudsman Services can only provide the costs involved where customers elect to contact OS: Energy. Ombudsman Services has no information about what other costs may be incurred by companies. 4.2 Ombudsman Services has considerable experience in the field of dispute resolution. We would be happy to provide clarification on any point in this evidence or if there is any other way we can help, please contact me. Lewis Shand Smith Chief Ombudsman July 2012 DECC s Collective redress consultation July