Energy giant agrees to £4.5m misleading claims pay-out

AN ENERGY company whose sales staff made misleading claims to customers has agreed a £4.5 million pay-out for needy households as part of a settlement with the industry watchdog.

Ofgem said EDF Energy’s doorstep staff failed to provide potential customers with complete information during the sales process, while those in its call centres made claims about savings before knowing their statements were accurate.

In the wake of its marketing licence breaches, EDF has agreed to set aside £3.5 million for a £50 refund to about 70,000 customers who have received its Warm Homes Discount. It will also be making a £1m donation to an energy awareness campaign run by Citizens Advice.

Ofgem said customers would be better served by EDF making payments to benefit those customers in need rather than imposing a fine. It said that by accepting some shortcomings in its sales practices, EDF had escaped a bigger penalty.

The regulator added that it was continuing its investigations into sales practices at Scottish Power, SSE and npower.

Sarah Harrison, Ofgem’s senior partner in charge of enforcement, said: “In the energy market in general much more needs to be done to restore consumer confidence and all energy suppliers should now get behind Ofgem’s reforms to introduce a simpler, clearer and more competitive energy market.”

EDF said it acknowledged “limited shortcomings” in some elements of its sales processes during 2010.

Martin Lawrence, managing director of energy sourcing and customer supply, said: “We’re obviously disappointed that we failed to live up to the high standards that we expect of ourselves. As soon as the issue was identified we immediately took action to satisfy ourselves that we’re fully compliant.”

Ofgem said customers were not always provided with complete information during the sales process, for example on some contract terms or on the way in which their monthly direct debits had been calculated and on how estimates of their annual consumption were calculated.

And call centre staff sometimes made opening statements in their calls to customers that claimed savings before knowing whether the statements were accurate for the specific customer on that call, and sometimes assumed that the customer was on a standard tariff without checking.

Ann Robinson, director of consumer policy at uSwitch.com, said: “Today’s announcement marks a real turnaround in thinking in the energy industry.

“Both EDF Energy and Ofgem are to be applauded for taking such a grown up, constructive and responsible approach.

“Instead of simply slapping down a fine, both have worked together to tackle the issue and to then agree a penalty that will actually help consumers.

“As a result, £4.5 million will be going towards helping vulnerable customers, which satisfies the need for a penalty, but also does some good.

Audrey Gallacher, the director of energy at Consumer Focus, said it was positive that an

energy company has worked with the regulator to tackle the issue.

She added: “We’ve called for Ofgem to have the power to make sure energy customers benefit from any fines – so it’s good news that this voluntary approach has led to customers being compensated rather than money returned to the Treasury.”