When: 3 May 2013
Law stated as at: 8 May 2013
Energy regulator Ofgem has imposed its largest ever fine of £10.5m fine on energy provider SSE for “prolonged and extensive” mis-selling of its services in breach of its licence conditions.
The fine was levied due to numerous breaches by SSE of its obligations relating to telephone, in-store and doorstep sales activities and reflects the seriousness and duration of the breaches, the likely substantial harm to consumers and the likely gain to SSE.
According to Ofgem, consumers who dealt with the SSE sales team were exposed to misleading statements and inaccurate and misleading information on SSE’s charges and those of its competitors, which meant that they were unable to make well-informed decisions about whether to switch to SSE.
Examples include SSE telling customers that they would save money when they were in fact switched on to a more expensive contract, telling customers that they could make larger savings if they switched to SSE than were possible and telling customers that other suppliers were making “all sorts of false promises”.
Ofgem also found that SSE’s telesales staff had not provided customers with adequate information about the price of energy with SSE, including exit fees, unit rates and standing charges. This information was only provided after the customer had already signed up to getting their energy from SSE.
Management failures highlighted
It is worth highlighting that Ofgem drew particular attention to failures in SSE’s management arrangements.
While there was no evidence that SSE’s senior management had engaged in any wilful or intentional non-compliance with SSE’s licence conditions, Ofgem was of the view that there had been inadequate monitoring and control of SSE’s sales agents, and that SSE’s board had paid insufficient attention to compliance.
Examples of failures found in SSE’s management arrangements included the use of misleading scripts and a failure to ensure accurate estimates of SSE charges and comparisons with competitor charges were provided. Ofgem also highlighted the fact that people employed to do the main auditing of doorstep sales received a commission on sales and therefore had a financial interest in allowing misbehaviour to go unreported and that there were no contracts in place with SSE agents carrying out telesales.
Sarah Harrison, Ofgem’s Senior Partner in charge of enforcement said of the fine:
“[This] fine sends a clear message to suppliers that Ofgem will hold to account those companies which fail to treat consumers fairly. It is time for the energy industry to take note and get behind Ofgem’s reforms to rebuild trust and make the market simpler, clearer and fairer for customers”.
Ofgem has no powers to require SSE to compensate customers
Ofgem does not yet have powers to require companies to award consumer compensation, but a total of £5m has nonetheless been set aside by SSE to reimburse customers who have been deceived.
However, customers must call an SSE phone line or fill out a form on the SSE website if they feel they are entitled to compensation.
It is worth noting that Ofgem has been arguing for powers of redress and has been backed by the Government with new powers in the Energy Bill, which will further strengthen their ability to take action against energy providers once they come into force.
Ofgem still has on-going investigations into mis-selling by other energy providers such as Scottish Power and Eon to complete, so more fines may be on the way shortly!
Why this matters:
The hefty fine levied against SSE demonstrates that Ofgem takes the issue of customers being mis-sold to very seriously. While some would argue that £10.5m is not an especially significant amount of money for a massive corporation like SSE, it is also worth taking into account the impact that the negative publicity such a fine can attract, which can have a lasting effect on sales and reputation.
The fact that Ofgem is pushing for extended enforcement powers in the Energy Bill is another indication that it intends to take a hard line with energy companies that breach their licence conditions. Ofgem has also recently announced that it is investigating SSE and five other energy providers about their failure to meet energy efficiency targets, which could also lead to fines.