Competition: Consumer Focus
18 March 2011 | By Abigail Townsend
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Consumer Focus was formed by the Consumers, Estate Agents and Redress Act 2007, which merged the National Consumer Council with Energywatch and Postwatch. During its time the watchdog has had many run-ins with companies but few have been as highprofile, or as successful, as its 2009 clash with npower.
In 2007 the energy group changed the way it applied charges for the first block of higher priced gas units that households paid. The move sounded alarm bells for several alert consumers: they were unhappy with the way the information was being conveyed and concerned about possible overpayment. They complained to Ofgem, the energy watchdog launched an investigation, and in February 2009 npower was made to repay an average of £6 each to 200,000 customers.
Not everyone was happy. The concern was two-fold: that the amount paid was not sufficient, and that far more than 200,000 customers had been affected. It was at this point that Consumer Focus became involved.
“We looked at the way Ofgem handled the investigation; there were also a number of individuals who were keeping up the fight, and we knew about that,” says Gemma Bowen, head of the investigations unit at Consumer Focus. “They obviously didn’t think Ofgem had satisfactorily resolved the issue.”
Bowen joined Consumer Focus in 2009. She trained as a solicitor at Irwin Mitchell and it was because of her legal background that Consumer Focus recruited her. But she was not hired as a traditional in-house lawyer. Instead, as head of the newly created investigations team, her focus was on fighting perceived wrongdoings on behalf of consumers.
Consumer Focus’s dedicated energy team had been handling the npower case until Bowen’s arrival. They had already sought advice from specialist claimant firm Hausfeld about what options they had, and Bowen continued to work closely with outside experts.
Bowen’s first priority was to see if npower had breached its contract with its customers, and then investigate whether Consumer Focus would be able to take part in legal proceedings against the energy group on behalf of all affected parties.
Counsel believed that under sections 11 and 23 of the Consumers, Estate Agents and Redress Act, Consumer Focus could indeed pursue legal action. At its most basic, Section 11 allows Consumer Focus to investigate serious consumer complaints, while Section 23 confers on the body a “supplementary power to do anything (other than borrow money) which is calculated to facilitate, or is incidental or conducive to, the exercise of any of its functions”.
It was decided that the terms of Section 23 were broad enough to include commencing proceedings as well as taking out insurance against potential costs, which had been a concern of the board. One of Bowen’s core roles was updating the board and this finding was particularly reassuring for members. “This was a first, so they needed to know we could play a part,” she says. “It gave them the confidence to be quite robust.”
Without-prejudice talks with npower were held concurrently and Bowen or members of her team would often attend.
“Even if you don’t say anything, they know you’re there,” she says. “It just gave the sense we were pretty serious. Something reasonable had to come out of these discussions rather than just another small payment.”
Bowen believes the negotiations did not truly turn in Consumer Focus’s favour until the watchdog got the advice that it would be able to launch legal proceedings if necessary.
“We’ve always been careful in the wording of any releases we’ve put out in regard to what we did or did not do with npower,” she says. “But we were taking advice and when we got the best possible advice we had one of our biggest and best meetings with npower. I can’t say the threat of litigation is what made them pay, and I can’t say hand on heart if anyone actually said to npower, ’We will take action against you’, but an article came out around February [2010, in The Sunday Times, implying that litigation could be on the cards] and that was a real focus.
“After four months of discussions it galvanised npower and they were very cooperative from then on. They went back, looked at everyone’s accounts and calculated individual overpayments rather than a median figure.”
With the deal agreed, the legal team took a step back as the calculations were carried out. “We still gave advice as and when needed,” says Bowen. “We were just in the background to help.”
The two sides agreed that affected consumers would receive an average of £35 each, making a collective refund of £63m plus VAT and interest, in contrast to the first Ofgem-negotiated collective refund of £1.2m. Npower informed around 1.8 million affected customers last year, and individual payments ranged from £1 to £100.
Bowen says the case highlighted the importance of working with colleagues in all departments. “Much of the hard work - the background and the calculating - was done by the energy team,” she adds. “We worked with people right across the organisation - PR, senior management, the board - as well as solicitors and barristers. The role I have, and the work we do, cuts across the whole of Consumer Focus.”
It was, she concedes, a baptism of fire, but also “potentially exciting - it would have been interesting to have the chance to take it further”.
Since the deal with npower was struck, however, Consumer Focus has been inked in for closure as part of government plans to cut the number of quangos.
“I was chuffed to bits when everyone got their money,” says Bowen of the npower payout, adding that she had been looking to expand the team until the announcement about Consumer Focus’s future late last year. “So from a personal perspective, it’s such a shame,” she says. “We’ve done well as an organisation, but we have so much more to do.”