Energy Sector Challenges: Customer Complaints and Ovo Energy's Financial Struggles
The UK energy sector continues to face significant challenges, illustrated by numerous consumer issues and corporate financial difficulties.
In Stafford, an elderly mother experienced ongoing problems after switching to British Gas with promised preferential rates on a smart prepayment meter. The meter stopped working, cutting her heating and preventing account monitoring. Multiple agents provided conflicting advice, and British Gas admitted an unexplained delay transferring the account. They planned to switch her to a credit meter, fix the app, and pay goodwill for the inconvenience. However, 18 days after switching, she remained unable to verify payments or consumption, with heating cut three times in one week.
In Glasgow, RW endured seven years of escalating bills from 2018 due to meter readings recorded in cubic feet rather than cubic metres. Attempts to resolve the issue with Bulb and Octopus failed until a switch prompted its discovery. The error meant RW could have been billed approximately 35 times what he should have been. Octopus corrected the issue, backdated the account, and provided a refund of over £8,000 plus 8% interest and 10% compensation, totaling just under £12,000. The Guardian amended their report to clarify this correction.
In Dorset, a teenage schoolgirl faced a £20 debt claim from Ovo Energy linked to a rental address she no longer occupied. GDPR regulations prevented her mother from addressing the debt. Ovo attributed the issue to tracing agents, cancelled the debt, deleted her details, and apologized with a box of White Company lotions.
In the broader sector, Ovo Energy has faced reputational damage, notably after urging customers to perform star jumps during the 2022 energy crisis. The company recently completed the acquisition of SSE's energy supply business, enhancing its market position and increasing founder Stephen Fitzpatrick's wealth.
Despite growth, Ovo Energy warns of doubts about its financial future and potential failure to meet Ofgem's resilience standards, prompting plans to cut about 200 jobs. Executive changes include CEO David Buttress stepping down after 18 months and CFO James Davies leaving, with Chris Houghton returning as CEO and Simon Todd replacing Davies. Dame Jayne-Anne Gadhia joined the board, replacing Justin King to strengthen leadership and governance.
Ovo seeks roughly £300 million in new funding to shore up finances and replace Mayfair Equity Partners, which holds about a 30% stake. However, investor interest has cooled; Verdane has withdrawn, Permira reportedly backed away, and Iberdrola explored a potential tie-up without a deal. Arma Partners is exploring a sale of a stake in Kaluza.
Financial dealings include Ovo paying Imagination Industries royalties for using the Ovo brand—typically between £2.5 million and £7 million annually but rising to £24 million in 2022 and £40 million in 2023, totaling around £122 million. A £150 million brand-license deal was signed with Fitzpatrick in shares, and £40 million payable in 2023 was waived, indicating substantial brand value to Fitzpatrick.
