Cadent has agreed to pay £24 million and establish a £20m community fund after an intervention from energy regulator Ofgem over three serious failings.
The gas distribution network company will also double the statutory compensation payments, at an estimated cost of £6.7m, made to customers who experience an unplanned gas supply interruption for longer than 24 hours over the next two years.
Cadent has acknowledged the following failings:
- During 2018, from analysis of regulatory data provided by Cadent, Ofgem became aware that Cadent was increasingly leaving residents in blocks of flats without gas for longer than necessary, for example while repairs to gas pipes were carried out.
- Cadent reported to Ofgem earlier this year that it failed to pay compensation over a six-year period to a possible 12,000 affected residents left without gas for over 24 hours as required, and finally,
- Last year, Cadent reported to Ofgem after reviewing its database of assets that it had no records of gas pipes (sometimes referred to as risers) in many high rise blocks of flats in its London network.
Network companies are required to keep records of assets, such as the pipes in their network. Cadent had no records of the 775 high rise blocks of flats, which meant they were not part of its regular inspection or maintenance programme.
Cadent has admitted all three failings to Ofgem, acted to rectify the issues, implemented new processes to address them, and submitted improvement plans for interruptions and record keeping.
Ofgem has now closed its investigation into the record keeping failures and will not take further action over gas supply interruptions and delayed compensation payments to affected residents.
Dermot Nolan, chief executive of Ofgem, said: "Cadent has a duty of care and responsibility to millions of people across half of the country who rely on the gas it pipes to their homes for cooking and heating.
"Cadent acknowledges that it failed these customers by leaving many without gas for longer than necessary, failing to properly compensate some of those affected and not having the proper systems in place to keep records of all the high rise blocks of flats it supplies.
"Ofgem has worked with the company, which is under new ownership and has given commitment to improve its operations to put customers at the heart of the business, to help it address its failings and prevent further harm to customers' interests.
"Cadent has also agreed to make a significant financial contribution to customers as redress in recognition of its past failings. This is a move we welcome."
Cadent has issued an unreserved apology to customers who have been affected.
Steve Hurrell, chief executive officer, said "We aim to put customers' needs at the heart of everything we do, and we acknowledge that in the past, we have fallen short of customer expectations and the higher standards we have now set ourselves; for this we are sorry.
"It is important within the energy sector to have a strong regulator to ensure customer interests are protected and we are working closely with Ofgem to restore confidence in us and build trust in our future plans.
"While Cadent is a relatively new business, some of its record keeping processes and practices go back many decades, and a number of the issues we are addressing today are a legacy of that past. We are taking the opportunity to reshape the company to set new standards of customer experience and are investing significantly through our community fund to reach those customers in the most vulnerable situations."