Small gas and electricity supplier Iresa has been banned from taking on new customers, increasing direct debits and asking for one-off payments until it resolves customer service issues.
Energy regulator Ofgem has ordered the firm to improve its customer service over the next three months, using what is called a 'provisional order'. If Iresa fails to make the required improvements, it risks having its licence revoked.
Amongst other things, Iresa has been told to extend its call centre hours, respond to customer emails within five working days and act to manage and identify all of its vulnerable customers.
Ofgem opened an investigation into Iresa's customer service last month, and will continue this investigation alongside the provisional order.
In January we reported that Iresa had suddenly hiked some customers' direct debits by up to 20% and some were facing long call times when trying to get through to customer services.
We've also long warned about Iresa's customer service issues in our Cheap Energy Club.
Martin: 'It is time that much stricter tests were set up before firms are granted licences'
Martin Lewis, founder of MoneySavingExpert.com, said: "This is a very important step by Ofgem. For many of its customers Iresa has not come close to living up to even minimum standards. I hear often of customers locked into its plans, with no way to move and no way to contact it. The big question here is should the firm be allowed a licence at all?"
Speaking generally about the energy market as a whole, Martin said: "There is a wider issue in the energy market with the political push to encourage as many new entrants as possible. While increasing competition is important, it cannot be done at all costs. It is time that much stricter tests were set up before firms are granted licences.
"Firstly, the people setting them up must be 'fit and proper' – energy is a key public service and can't be run by those looking for a quick buck or at the extreme to rip people off.
"Secondly, they need appropriate financial means. If not there's a risk they operate firms like a Ponzi scheme aiming to draw people in with unsustainably cheap prices to gain cash flow, without the resources to support those customers.
"Thirdly, there should be capacity limits based on the infrastructure set-up. Too often firms come in with loss-leading prices which attract large numbers of customers, but an inability to deal with those volumes."
What has Ofgem ordered Iresa to do and why?
Ofgem says it has seen substantial information to suggest Iresa risks causing harm to consumers due to its customer service processes.
As a result, the regulator has ordered the firm to improve the service it provides to its customers. The improvements include:
- Extending call centre hours and bringing down average call waiting times to below five minutes
- Responding to customer emails within five working days and responding to customers who request a call back by the end of the next working day
- Clearing a backlog of consumer emails
- Logging and recording all expressions of customer dissatisfaction
- Acting to manage and identify all of its vulnerable customers, including offering to put them on a priority services register
There are deadlines for each of these specific actions over the next three months and if Iresa fails to improve its service within these deadlines, Ofgem may take further action.
Ofgem says its action does not imply it has found conclusive evidence of a breach of licence conditions at this stage.
What does Ofgem say?
Dermot Nolan, chief executive of Ofgem, said: "This order sends out a very clear message to suppliers that where they fail their customers on service, Ofgem will step in and take strong action.
"It's crucial that all suppliers provide customers with good service, including acting quickly and effectively to sort things out wherever problems occur.
"Iresa now needs to act quickly and put its house in order otherwise ultimately its licence could be revoked."
What does Iresa say?
A spokesperson for Iresa said: "We are actively working to fix the issues raised by Ofgem. We are confident that our customers will see a noticeable improvement in our customer service response times and we apologise to customers who we have let down in the past.
"We are committed to improving our quality of service to deliver a much better customer experience."