Ofgem has lifted the provisional order banning Foxglove Energy from taking on new customers, despite raising a litany of concerns over its financial reporting to the regulator.
The energy retailer – which trades under the name Outfox the Market – had been prohibited from acquiring new customers since July 2022 when Ofgem ruled that the company lacked sufficient cash to cover its Renewables Obligation and sufficient hedging to limit its exposure to volatile wholesale energy prices.
The order, which was confirmed by the regulator in October, also barred Foxglove from making any payments, providing any loans or conducting any asset transfers unless they were essential its operation as an energy retailer.
The regulator said it now believes the firm has sufficient funds to meet its licence obligations concerning financial responsibility and it is therefore lifting the order banning the acquisition of new customers.
However, Ofgem has also issued a new final order banning all non-essential payments, loans and asset transfers by Foxglove until it is able to respond accurately and on time to requests for information.
As justification, the regulator cited a long list of instances over the last year where the company’s responses were submitted late, lacked detail or supporting evidence, or contained errors, sometimes all at the same time.
For example, Ofgem said there were “gaps and errors” in the company’s narrative response regarding its fit and proper test for important individuals at energy retailers. The regulator said Foxglove did not provide any supporting material for its response, which was almost two months late. The regulator said it had to chase the supplier to obtain the missing information, which it did not ultimately receive until almost six months after the deadline.
Ofgem said the response to its request for information on vulnerability was submitted on time in July 2022 but “did not contain a sufficient explanation or understanding of the areas required.”
“The lack of provision of a comprehensive narrative explanation made it very difficult to assess Foxglove’s strengths and weaknesses in this area,” the regulator explained.
Ofgem said it had to devote additional time and resources to obtain the necessary information and noted that Foxglove’s compliance with relevant obligations remains under assessment.
When Foxglove was more than a month late in responding to a request for information on the tariffs it offers to customers, the company told the regulator the response was “lost among everything else going on.”
“This indicates that it does not have robust processes and systems in place to meet its regulatory obligations,” Ofgem commented.
The regulator said three of Foxglove’s responses concerning financial stress tests were late – noting “no other supplier has been as consistently or repeatedly late” – and that the quality of the submissions was so poor it asked the company to rework its forecasts.
It said another financial forecast indicated their cash position was “materially lower than amounts disclosed in other requests for information,” leading to concerns that its forecasts were “ambitious and not reflective of their financial position.”
A series of monthly responses concerning the financial responsibility principle were also late and contained errors around areas such as net assets and hedging. In the case of the latter, Ofgem said hedging information “often reported how much Foxglove aspired to hedge rather than how much they had actually hedged”.
Ofgem said the “repeated instances of late and inaccurate” financial submissions in 2022 prompted the regulator send a team to Foxglove’s offices in mid-March discuss their forecasts, performance and accounting processes.
The regulator said the financial forecasts presented by the company during the meeting had “several material errors,” adding: “It was apparent that Foxglove was unusually reliant on external auditors for their financial reporting and information quality remained an issue.”
Ofgem said it therefore believes Foxglove is contravening, and likely to continue contravening, the licence condition requiring suppliers to maintain the necessary capabilities, systems and processes to company with legislative and regulatory obligations.
It said the ban on non-essential payments, loans and assets transfers will remain in place until the company is able to respond accurately and on time to requests for information, and it provides the regulator with evidence and explanations to support the results reported in the next quarterly stress test.