Energy giant SSE hit with record £10.5m Ofgem fine

Ofgem blamed management failure to follow industry guidelines as it dished out the largest ever fine for an energy supplier.

The inquiry found that SSE provided inaccurate and misleading information on prices and potential savings to customers about switching suppliers.

Consumer groups said last night that there could be “large penalties for others” if they are found guilty of comparable breaches. Three other companies are currently being investigated by Ofgem for mis-selling.

The company said it accepted the decision, apologising “unreservedly” to customers and saying it had “taken important lessons on board”.

A £5m mis-selling fund has been set aside to compensate customers who have fallen victim to the breaches, and the company has already sent out 970,000 letters to existing customers alerting them to its compensation process.

The three other Ofgem investigations pending are into Glasgow-based ScottishPower, nPower and E.ON. In March, EDF Energy was fined £4.5m .

Norman Kerr, director of Energy Action Scotland, said the size of the fine for SSE suggested that other companies could be facing penalties of a comparable magnitude.

“This is supposing that there will be future fines of a similar size,” he said. “The fact that SSE did have such a large fine suggests similarly large penalties for others.”

Ofgem does not yet have powers to require companies to award consumer compensation, although these powers are due to be introduced in the future with the new Energy Bill.

The regulator said sanctions should be regarded as a deterrent to other energy companies.

“This fine sends a clear message to suppliers that Ofgem will hold to account those companies which fail to treat consumers fairly,” said Sarah Harrison, Ofgem’s senior partner in charge of enforcement.

“In order to restore trust in the energy market, suppliers must comply with their obligations and play it straight with consumers. Ofgem’s findings show SSE failed its customers, mis-sold to them and undermined trust in the energy supply industry.

“These failings did not just take place on the doorstep, but also in the management of SSE. Ofgem’s fine reflects an absence of effective management control over energy selling.”

Ofgem said two years ago that energy companies needed to offer a simpler pricing structure – but there are still more than 900 tariffs available today. A series of further reforms – including a cap on the number of tariffs each company can offer and a single advertised unit price – are due to come into force in the summer.

Some customers were told by SSE salespeople that they would save money when in fact they were switched to a more expensive contract. Customers were told that other suppliers were putting their prices up, or that other suppliers’ price increases were higher than they actually were. Some customers were even told that by switching to SSE they could make larger savings than were actually possible.

Official SSE scripts used by sales people were found to be inaccurate and misleading –while the people employed to do the main auditing of doorstep sales received a commission on sales and therefore, Ofgem said, had a financial interest in not reporting misbehaviour.

Consumer groups praised yesterday’s sanctions, warning that consumer confidence in energy companies was at an all-time low and urging firms to become more transparent.

Which? executive director, Richard Lloyd said: “It’s absolutely right that Ofgem has punished SSE for their completely unacceptable past practices.

“With scandals like this, it’s no wonder that less than a quarter of people say they trust energy companies. This record fine sends a clear warning message to all energy companies, but will be too little too late for many customers who were mis-sold.”

A statement issued by SSE said the company had begun to change its procedures while the Ofgem investigation was taking place.

“SSE is deeply regretful that breaches occurred and apologises unreservedly to any customers who have been affected by sales activity which ran counter to the values and culture of the company,” it said. “It has taken important lessons on board and has transformed its approach to sales to ensure that it will not fall short of the standards all of its customers deserve.”

As well as halting all doorstep selling, SSE has also brought all domestic telesales in-house, launched a new training programme for sales staff and set up a post-sales verification process. The group has restructured, creating a retail division and hiring externally to head the new team, with a new director of sales also brought on board.

Bonuses were withheld for its three executive directors in 2012, the company added.

The fine comes on top of a further 14 investigations carried out by Ofgem since 2010. A total of £35m additional fines have been handed out in the past three years.

Clare Francis, editor-in-chief at MoneySupermarket.com, said: “On behalf of the nation’s long-suffering bill-payers, it is good to see the regulator clam pdown on mis-selling tactics.

“The energy firms have taken measures to change their sales practices in recent years, but Ofgem’s intervention is a clear signal unfair practices simply aren’t acceptable to customers.

“Doorstop selling might have stopped, but energy providers have continued to market unsuitable products.”

Chancellor George Osborne described the penalty as “quite right” and said he would like to see the proceeds of future fines given to customers, rather than the government.

“SSE have treated their customers badly and it’s quite right they’ve got this big fine,” he said. “But I’d like to see changes, first of all, so that in future these fines can go back to the customers, rather than to the government and, second, so that these energy companies are forced to put families on the lowest tariffs to make sure people get the maximum help with their energy bills.”

Customers who have been hard hit by the mis-selling tactics are now being urged to ensure they claim compensation from the fund set aside by SSE.

Ann Robinson, of uSwitch.com, said: “SSE customers should have been contacted to see if they qualify for a reimbursement. However, if they haven’t and feel they are out of pocket, they should contact SSE for compensation.

“Until this trust is restored, we won’t get the market moving and if we don’t have a fully competitive market, consumers will lose out. This fine should send a clear message to energy suppliers that they must treat customers fairly.”

A spokesman for ScottishPower said: “There is an ongoing investigation and we are working very closely with Ofgem.”