APPENDIX 9
Supplementary memorandum by energywatch
AUTOMATIC PAYMENT OF COMPENSATION
THE CURRENT
SITUATION
Under the present arrangements any consumer
who believes they are entitled to a payment under the Guaranteed
Standards of Performance (GSoP), must make a claim, in writing,
within one month of supply being restored. This claim should be
made to the distributor (DNO) but can be made to the supplier,
who should pass on such claims. The current process is shown in
the flowchart at Annex I.
From the chart it can be seen that the DNO relies
upon information received from the customer to process a cheque
where it agrees a payment under the GSoP is due. The DNO should
then (under the supplier hub principle) pass the payment to the
Supplier who should then pass it on to the consumer. Many DNOs
still prefer to make payments direct to the consumer and this
is allowed for in the regulation. Under the regulations governing
the competitive market (The Master Registration Agreement (MRA)/Licence
conditions) DNOs have no need to and, therefore, should not know
the names of individual consumers, only details of premises and
who is the supplier.
Problems with the current arrangements
The current arrangements rely on those who wish
to claim being sufficiently aware of the regulations to make a
timely claim. The majority of people—and especially the
elderly and most vulnerable groups in society—do not know
how to make a claim and therefore do not receive money that they
are entitled to. During the October 2002 storms, for example,
over two million customers were off supply, many of whom were
entitled to compensation. However, only 3,250 people made a claim
for compensation.
Additionally, those consumers who have made
claims for compensation in the past have found the process lengthy
and cumbersome. For example, the determination process following
the October 2002 storms took a total of 11 months.
What energywatch believes should happen: Automatic
Compensation
energywatch believes that when the threshold
for compensation is achieved, regardless of the situation causing
the power outage, all consumers affected should be eligible for
compensation—unless the event is one of force majeure.
energywatch also believes that compensation should be paid automatically
to affected consumers without having to be claimed. We believe
that automatic payment of compensation would remove confusion
and uncertainty from consumers, and remove pressure from DNOs
at a difficult time.
Where the event causing the outage is deemed
exceptional the distributor and Ofgem would discuss whether (under
pre-determined rules) any alteration of the company's price control
was necessary.
Annex 2 shows a model that DNOs could adopt
in order to make automatic payments of compensation. This model
relies on accurate data so requires that DNOs and suppliers take
action to improve the quality of this data, but does allow for
DNOs to gather data whilst completing restorations (this is in
the best interests of DNOs for the purpose of running their businesses
more effectively anyway). Trends indicate that next year the data
should be accurate enough for the process of paying compensation
automatically to begin.
ISSUES FOR
FURTHER CONSIDERATION
Unless the data is 100% accurate there is a
small risk that DNOs may be making payments to consumers who did
not lose supply or not making payments to those who did. Presently,
DNOs argue that they need a consumer to make a claim so that they
can be sure that they are making payments correctly. They state
that this is because their own data is not sufficiently robust
to allow them certainty over which premise is connected to which
feeder or service cable (connectivity data). They feel that this
situation exists for two reasons:
— The data is dynamic—consumers
are constantly moving premises or changing supplier so it is difficult
to track who to make payments to; and
— As consumers have always been required
to make a claim then there was no real need to have complete data
and now the MRA prohibits DNOs knowing who the consumer is.
There has been much discussion about the robustness
of DNOs' data, and in particular the connectivity data. The Meter
Point Administration Service (MPAS) is the service provided (under
statutory obligation) by all DNOs. It is a record of all meter
point reference numbers and the supplier data associated with
that meter point number. There is no need for the consumer's name
to be included in this data although it was allowed to be during
the first few years of privatisation.
The quality of the MPAS and connectivity data
is measured on behalf of Ofgem as part of the Information and
Incentives Programme (IIP). The most recent survey of connectivity
and MPAS data has just been carried out and it revealed that MPAS
data was almost 100% accurate and that connectivity data was 98%
accurate. It should be noted that this accuracy level is improving
all the time. It should also be noted that whilst a DNO may not
know all premises connected to a circuit before supply is interrupted
they should be able to know once supply has been restored (this
data can be gathered as the restoration work is being carried
out).
Suppliers will need to be much more involved
and "on the ball" if they are to play a major part in
the payment of compensation—or the MRA will need to be changed
to allow DNOs to know the names of their customers.
ANNEX 1
Current Process for the Payment of a Guaranteed Standard Payment
ANNEX 2
Suggested Process for Automatic Compensation
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