E.ON to pay £12 million for misselling scandal

ENERGY supplier E.ON is to pay a record £12 million to vulnerable customers after an investigation found it broke energy sales rules over a three-year period.

Energy giant E.ON's sales strategy has come under scrutiny. Picture: AP

Regulator Ofgem said yesterday that the redress package reflects the harm caused by E.ON’s extensive poor sales practices between 2010 and 2013. Given the large number of contracts signed in this period, Ofgem said it was likely a considerable number of customers were missold tariffs by E.ON.

Ofgem said that E.ON failed to properly train and monitor its staff and those it employed through third-party telesales agencies, leading to incorrect information being provided to customers on the doorstep and over the phone.

As part of the redress package, E.ON will pay around £35 to 333,000 of its customers who are normally recipients of a “warm home discount”. It will also make automatic payments to some vulnerable customers who may have been affected by the poor sales practices.

The company has set up a dedicated hotline and will write to around 465,000 customers it has identified through its redress work in order to see if they are entitled to compensation.

E.ON chief executive Tony Cocker said as part of overhauling its sales operations, the company has ended face-to-face sales and outbound residential telephone cold-calling.

He added: “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.”

Since 2010, Ofgem has imposed £100m in fines and redress against energy companies for various rule breaches, including £39m for misselling.

Npower said in December it would pay £3.5m in redress to customers after it was found to have breached rules.

ScottishPower paid £8.5m to customers last year while EDF made £4.5m available through a redress scheme in 2012. Last year, SSE was issued with a £10.5m penalty for “prolonged and extensive” misselling.

E.ON’s fine from Ofgem was a nominal £1 as the regulator decided the £12m penalty should go to vulnerable customers rather than the Treasury.

Some of the breaches continued until last December, despite earlier pledges from E.ON that it would make changes and improvements to its processes.

Ofgem said sales agents did not always gather all the information required to make an accurate estimate of charges.

They failed to ask consumers if they were in debt or credit on their account and did not robustly account for seasonal variations in consumption.

They also failed to ask a customer if they had an economy 7 meter.

Between June 2010 and 2012, the commission structure for some external telesales agencies rewarded them for their sales performance only, without considering whether the sales had been made in a compliant way.