Office of the Gas and Electricity Markets (Ofgem) announced on Friday that following its investigation in the sales practices of UK energy company E.ON, it has penalised the company for its large scale mis-selling. This has resulted in largest supplier payout to consumers, with E.ON required to pay GBP12m in redress to vulnerable customers.
E.ON has agreed to a redress package that reflects the damage done by the company’s extensive poor sales practices conducted between June 2010 and December 2013. A large number of contracts were signed in this period, so it is likely that many of those customers were mis-sold to by E.ON. This was taken into account by Ofgem, which supports the Gas and Electricity Markets Authority, the regulator of the gas and electricity industries in the UK.
The company has also agreed to compensate customers who were mis-sold its products, which includes automatic payments to certain vulnerable customers such as pensioners, disabled and low income families. E.ON will pay approximately GBP35 to 333,000 of its customers who are normally recipients of the Warm Home Discount.
Ofgem’s investigation found that E.ON had not complied with energy sales rules and that E.ON’s management did not do enough to identify issues or act on problems when discovered. However, it found no evidence that E.ON’s senior management set out to deliberately mis-sell to customers. The Ofgem investigation also discovered that there was a failure by the company to properly train and monitor its own staff, as well as those it employed through third party telesales agencies. This resulted in the possibility of customers being mis-led by incorrect information being given on the doorstep and over the phone.
In addition, E.ON’s management arrangements meant that insufficient attention was paid to ensuring compliance with energy sales rules. In acknowledging these failings, the company has made considerable changes and improvements to its sales processes and no longer uses the third party agencies involved. Ofgem added that E.ON has shown good cooperation throughout the investigation, otherwise the penalty would have been higher.
E.ON has set up a dedicated hotline on 0800 0568 497 and will also write to around 465,000 customers it has identified through its redress work, to inform them of how to get in touch to find out whether they were mis-sold its products.
Ofgem’s Senior Partner in charge of enforcement, Sarah Harrison, stated: “Since 2010 Ofgem has imposed nearly £100m in fines and redress on energy companies for various rule breaches, including £39m for mis-selling, 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.”