A fine mess…

Fines are an everyday part of life – parking tickets, perhaps the odd bus lane infringement – but with any luck they’re usually few and far between, and more to the point, they’re not something you seek out on purpose either.

But this year is already shaping up to be an extremely expensive one for energy suppliers, with £29m in fines already issued in the first quarter. So what’s going on? This week we look at the reasons why suppliers are failing to meet the standards expected by the industry regulators and customers, and how data can help anticipate and prevent any further brushes with the regulator.

If you look at the historic data held by Ofgem that shows the value of fines issued back to 2010, it’s clear to see that there’s been an upward trend in recent years. 2015’s total was over double that of 2014, as was 2013 compared to 2012, so we really are seeing a rapid increase in the number and value of fines issued by the regulator. What does it all mean?

£215m since 2010, and nearly £72m in 2015 – assuming none of the suppliers in question ever set out to be fined, it’s clear that mitigating regulatory risk is becoming increasingly vital to any supplier, big or small. The big six have been hit quite hard in recent years, but the smaller independents also appear on the list. The independents aren’t the same size as big players yet, so their fines aren’t in the same quantum, but proportionally the fines will still be a bitter pill to swallow.

In the past we’ve talked at length about the value of data within an energy supply business, and the benefits that getting a grasp on it can have operationally and financially, but the knock-on regulatory impact isn’t something we’ve talked about explicitly here before. With £29m already levied so far this year, we decided it was about time we did.

So where are suppliers typically falling down when it comes to the regulators? Of the 48 cases handled by Ofgem so far this year, 16 can be attributed to Incorrect Billing, Misreporting, and Missed Deadlines (2, 6, 8, respectively), totaling £90m. Digging a bit deeper, it’s fair to say that all 16 of those cases hinge on data, and the supplier’s ability to manage that data accurately (billing & reporting) and efficiently (deadlines). Missed deadlines alone has cost suppliers over £60m in fines and redress payments – that’s a big number for what sounds like an administrative oversight, so what’s gone wrong?

Digging into each case specifically, and what’s sitting behind each deadline, the focus is typically around government mandated environmental or metering targets. Given the wide operational scope of these tasks, attributing data as the root cause might seem a bit reductive, but ultimately that is what it comes down to. Without a clear view of the portfolio, it’s incredibly difficult to monitor, target, or mobilise any defined actions.

Billing and reporting are clearer examples of where data is at the heart of the issue – without a granular view of their portfolio and associated costs, it’s nigh on impossible to true up and balance the costs issued to them by the industry against the bills they’ve in turn issued out to their customers. This leads to any unaccountable variance being written off to the P&L, and customers being issued invoices that may or may not align with their expectations.

The wider piece is here is that data is a vital component of an energy supplier’s business, and that getting it wrong has a knock on effect not only in the short-term with operational and financial inefficiencies, but can, and indeed does, lead to significant financial penalties if the problem is never truly addressed.

Our unified solution set ensures that suppliers have complete control and visibility of their businesses data, which means that from the ground up they have operational and financial oversight across the entire organisation.

Ready to take control of your businesses’ data? Get in touch.