Small energy supplier Economy Energy has been banned by Ofgem from taking on new customers for up to three months until it resolves customer service issues.
The regulator has warned that if the company fails to improve it could result in the revocation of its supplier licence.
Economy Energy has also been banned from increasing existing customers’ direct debits and asking customers for one-off payments during the period.
Ofgem has ordered Economy to improve its customer service and has outlined several ways it expects the company to address the issue.
The regulator expects the company to improve and expand its customer contact procedure via email and webchats.
It has also instructed Economy to address its billing and payment failures and issue customer refunds in a “timely manner”.
If Economy Energy fails to make improvements within three months, Ofgem can confirm the provisional order to extend the ban.
Ofgem said it has decided to act because of the “decline in the standards” of Economy Energy’s customer service, complaints handling processes and standards and billing and payment procedures.
Anthony Pygram, director of conduct and enforcement at Ofgem, said: “Ofgem is taking action to protect customers from suffering more harm from the unacceptable level of customer service provided by Economy Energy. We expect the supplier to take immediate action to rectify its failings or face having its ban extended.
“All suppliers are required to treat their customers fairly. Where they do not, Ofgem will take the necessary steps to ensure suppliers change their behaviour and to prevent further harm to customers.”
Ofgem has stressed the issuing of a provisional order does not imply that the regulator has found “conclusive evidence” of a breach at this stage.
Citizens Advice has welcomed the provisional order against Economy Energy.
Gillian Guy, chief executive of Citizens Advice, said: “Today’s (4 January) action by Ofgem is a welcome and necessary step towards fixing the consistently poor service experienced by Economy Energy customers.
“We’ve raised a number of concerns in recent months about Economy Energy to the regulator. These include failing to refund customer credit balances and not properly billing people switching to a different supplier.
“But there’s a wider problem behind this news. Ofgem’s upcoming licensing review offers a major opportunity to stop underprepared firms entering the market. Further action is needed now to address the ongoing issues caused by poorly performing companies already operating.”
Economy Energy scored just 2.4 stars out of five in Citizens Advice’s latest customer service rating.
Ofgem currently has three open investigations into Economy Energy. One which is considering whether the company breached competition law, one into its compliance with the Renewables Obligation and one observing its sales and marketing obligations.
Last year Ofgem banned Iresa from taking on new customers due to poor customer service. The supplier later ceased trading.
Economy Energy declined to comment. However a statement published on the company’s website says: “In light of the news received from Ofgem today, in which we are very disappointed, we wish to advise our customers we will be cooperating fully with Ofgem and are always committed to continual improvement of our business. We thank our customers for their support.”