Energy Company Licence Revocation

Debate between Roger Williams and Caroline Flint

Wednesday 3rd September 2014 Commons Chamber

[Caroline Flint]

Of course, Ofgem already has codes of conduct in which it outlines ways in which it would investigate a company. For example, let us consider some of the investigations over the past few years. We have had investigations of mis-selling, billing systems, predatory pricing and disadvantaging certain customers, such as those who have prepayment meters, and situations where people had been inhibited from changing supplier. Ofgem already has set thresholds and codes of practice that enable it to launch a formal investigation and set out clearly what areas it is considering, but the problem is that if a company is found guilty of any of the examples I have just given, that can basically result in a fine or some sort of consumer redress order. What Ofgem cannot do is revoke the licence. When there are repeated examples of companies failing to take action, when they might have been fined, and when they have put their hands up and said that they would do the right thing only for it to happen again, Ofgem cannot say, “I am sorry, the slate will not be wiped clean. You must account for your activities and that includes when you have repeatedly undermined your customers.”

As I said earlier, and I repeat this sincerely to the hon. Member for Warrington South (David Mowat), it seems to me that the problem is that when we look at the fines—£90 million over the past few years is no small amount of money to most people, but it is a pittance by comparison with the overall amount of money these companies make—it sometimes comes across as though paying the fines is just the cost of doing business. That is not good enough.

[Roger Williams (Brecon and Radnorshire) (LD)]

Surely the real deterrent for any company operating in the energy market is the loss of customers. We should be encouraging Ofgem to up the fines and increase the publicity, because the loss of customers will have an effect on investors.

[Caroline Flint]

I think there has been quite a lot of publicity about the fines, but what the hon. Gentleman says is interesting. The rules currently allow Ofgem to fine up to 10% of the company’s global turnover, which is a lot of money. I am not against Ofgem looking at whether it should be increasing the amount it fines, but I do think the ultimate sanction is about revoking a licence, because in such circumstances customers would have to be found a new supplier for their energy. Currently, that is exactly what Ofgem can do if a company goes into administration or if it fails to deliver gas and electricity to people’s homes. Is it not bizarre, however, that it cannot do this where there have been repeated offences against consumers through harmful customer practices that not only undermine trust in the energy market but, more important, make customers pay a heavy price?