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E.ON Fined for Mis-Selling Energy

E.ON are the latest supplier to be fined for mis-selling but Ofgem’s proposals for a universal code of conduct don’t cover suppliers’ sales interactions. Go figure.

Ofgem have ordered E.ON to repay to its customers a total of £12m for those affected by their mis-selling activities. This represents the largest ever penalty imposed by the regulator in a mis-selling scandal that is estimated to have affected at least 330,000 customers.

E.ON is the latest Big 6 energy supplier to be called to account for irregularities in their sale processes following BGB, Npower, SSE and Scottish Power. Yet despite this overwhelming precedent Ofgem appear unwilling to tackle the issues at source.

In explaining their decision Ofgem said:

“The agreed redress package reflects the harm caused by E.ON’s extensive poor sales practices carried out between June 2010 and December 2013. Given the large number of contracts signed in this period it is likely a large number of customers were missold to by E.ON”

Sarah Harrison, Senior Partner in charge of enforcement at Ofgem added:

“Since 2010 Ofgem has imposed nearly £100m in fines and redress on energy companies for various rule breaches, including £39m for misselling, and introduced radical new reforms to make the market simpler, clearer and fairer for consumers. The time is right to draw a line under past supplier bad behaviour and truly rebuild trust so consumers are put at the heart of the energy market. E.ON has today taken a good step by accepting responsibility for its actions and putting proper redress in place.”

Ofgem said it found no evidence that E.ON’s senior managers had deliberately intended to mis-sell, but that they were culpable in that they had consistently failed to ensure that their sales staff were adequately trained and that their policies and processes met market rules.

In response E.ON chief executive Tony Cocker said:

“It is completely unacceptable that we may have been unclear with customers about their tariff choices and as a result those customers may not have made the best choices for them”

“There was no organised attempt to mislead, and Ofgem has acknowledged this, but that does not excuse the fact we did not have in place enough rules, checks and oversight.”

Ofgem summarised E.ON’s breaches as:

  • Providing misleading information to customers
  • Having management in place who failed to take sufficient steps to ensure sales were compliant with rules
  • Having poor auditing results and failing to act on those poor results
  • Having inadequate training of staff
  • Failing to provide the key terms of a contract before the contract was agreed.

Since 2010, Ofgem has imposed £100m in fines and redress on energy companies for various rule breaches, including £39m for mis-selling alone.

Indeed this latest fine follows hot on the heels of Ofgem’s decision last month to finally fine British Gas £5.6m for blocking customer switching over a period of 7 years.

Npower, Scottish Power and EDF have each agreed penalties with Ofgem in recent years. The only operator to contest a mis-selling case with Ofgem was SSE, which led to the levying of a £10.5m fine.

This is worrying; indeed a conservative view would say that the Big 6 energy suppliers have all been complicit in sub-standard sales standards, consciously or otherwise.

However at least, now, finally Ofgem are acting.

But there is a huge twist to this tale…

Ofgem are currently consulting on proposals for regulating non-domestic Third Party Intermediaries (TPIs).

Within this Ofgem are placing a series of safeguards and disclosures that customers can expect from their interactions with an energy broker.

Alarmingly however, Ofgem apparently see no need to extend these standards of conduct to suppliers.

Indeed the suppliers though subject to supply licence conditions will be able operate to a different set of standards and will face a far less expedient redress process if misdemeanours are repeated.

This is totally unacceptable.

It would be of concern even in a fair operating market to have such a two-tier standard enshrined by the regulator, however in a market characterized by supplier mis-selling it is simply a dereliction of duty for Ofgem not to enforce these standards across the market, regardless of the parties involved.

Business Juice, in our response to Ofgem’s consultation, have called for ALL business energy sales interactions to be covered by a single, comprehensive code.

We note with interest that Ofgem have extended the consultation period to 30th June 2014, we hope that this is the opportunity for Ofgem to address the real, core and proven failings in the business energy market once and for all.

Anything less would be intolerable.

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