Energy regulator Ofgem launched an investigation into non-domestic energy supplier Farringdon Energy on Friday (10 May).
The investigation has been launched to determine whether the company is in “compliance with rules around treating microbusinesses fairly and their operational capability”. This is outlined in the requirements of Standard Licence Conditions (SLC) 0A and 4A.
SLC 0A relates to treating microbusinesses fairly, requiring suppliers to act in a “fair, honest, transparent, appropriate and professional manner.” SLC 4A calls on suppliers to maintain operational capability, particularly in meeting regulatory requirements and mitigating customer risk.
On 9 May, Ofgem issued a Provisional Order to Farringdon in accordance with the Electricity Act 1989. The regulator believes Farringdon has failed to maintain robust internal capacity, systems and processes to enable it to serve its customers efficiently. it also questions whether the company is able to effectively identify likely risks of consumer harm and mitigate those risks.
The Order states that the firm has four weeks to provide Ofgem with a report containing supporting documentation confirming that it has complied with the requirements.
It is worth noting that an open investigation does not imply that Ofgem has made any findings regarding non-compliance.
Ofgem cracks the whip
Ofgem’s role as the energy regulator often requires it to “crack the whip” should any energy firms breach their contractual obligations. Last year, this saw Ofgem increase its fines and reparation payments collected to around £77.2 million – a £50 million increase in 2023 compared to 2022.
Ofgem recovers these funds when the regulator identifies companies breaching their licencing conditions or when they are found to be failing their customers.
An example of such a breach includes the electricity generator EP SHB Ltd, which was found to be securing “excessive profits” at consumer expense and was ordered to pay £23.63 million for the transgression in October.
This followed a £9.78 million fine enforced on SSE Generation for obtaining excessive payments from National Grid ESO during the June transmission constraint and a £6.12 million fine voluntarily paid by Drax Pumped Storage Limited for submitting “excessively expensive” bids to reduce its generation in the Balancing Mechanism in relation to Cruachan Power Station.
