Social Value
Context
The winter of 2022/23 saw an unprecedented rise in wholesale gas prices due to post Covid-19 market conditions, high inflation and Russia’s invasion of Ukraine. Experts were forecasting a £2200 (120%) increase in average annual energy bills which could have pushed millions of households into fuel poverty, forcing some of the most vulnerable consumers to choose between heating and eating. To reduce the impact of the energy crisis on consumers, the Government introduced the Energy Price Guarantee (EPG) on 01/10/22.
The EPG applied a fixed discount to each unit of energy consumed per household which was subsidised by the Treasury. Around c.£28 billion of funding was ringfenced; supporting 26 million households with an average of £1,000 in bill reductions. Ofgem, the GB energy regulator, was tasked with standing-up the compliance and enforcement function for this critical energy affordability Scheme, using its powers to ensure suppliers were treating customers fairly by applying the EPG accurately.
Support
Moorhouse provided compliance and enforcement expertise and technical energy industry advisory for 12 months from November 2022. Upon mobilisation, we agreed with Ofgem some key design principles for a best-in-class compliance and enforcement function to ensure the EPG’s full benefits were delivered, including:
- Consumer centricity: Protecting consumers is our key purpose and is at the heart of all that our team does.
- Collaboration: Building collaborative relationships with the Department for Energy Security and Net Zero and wider Ofgem teams.
- Data-driven: Leveraging data analytics to arm Ofgem teams with best-in-class insights and visualisation.
- Future ready: Ensuring Ofgem were set up for success in the future should similar Government interventions be required.
Moorhouse worked with Ofgem shoulder-to-shoulder across 4 key workstreams:
- Compliance: Moorhouse developed bespoke reporting dashboards and automated models to assess over 250,000 energy tariffs for compliance. Where we identified customer detriment, we defined supplier non-compliance escalation processes, collaborating with suppliers to agree on refund and goodwill packages for consumers.
- Enforcement: We created enforcement escalation procedures and best practice templates for Ofgem, and our legal and policy experts provided case management support to lead supplier investigations.
- Project Management: We stood up a Project Management Office, establishing best practice planning, governance, reporting, and risk processes.
- Process Improvement: We assessed the existing capabilities, tools, and process underpinning the function and provided recommendations and a roadmap for improving them. To ensure continuous improvement, we implemented a variety of Lean techniques to improve efficiency and effectiveness.
Impact
The impact has been significant:
- Investigated 200+ non-compliance cases, ensuring remedial action was implemented for 750,000+ consumers, including over £4m of bill corrections and goodwill payments.
- Concluded compliance cases against Ovo and Good Energy, agreeing a £2.7m compensation package for 18,000 overcharged consumers.
- Our data analytics model incentivised supplier best practice by identifying data quality issues in their regulatory submissions.
- Successful implementation and adoption of refined compliance and enforcement processes, data models and dashboards which are still in use today. We also supported the recruitment and upskilling of Ofgem staff successors.
View the Moorhouse Consulting profile in the MCA Members Directory.