Not a good week for energy companies

SSE is to be fined £10.5 million for mis-selling – the largest ever penalty imposed on an energy company. Ofgem said it found “failures at every stage of the sales process” across SSE’s telephone, in-store and doorstep selling activities.

Ian Marlee, managing director for markets at Ofgem, told the BBC Radio 4 Today programme: “This is a woeful catalogue of failures by the SSE management. This fine represents the fact that what they were doing was allowing a culture of mis-selling to continue, they weren’t doing enough to prevent sharp selling practices from their selling agents, they actually provided misleading sales scripts. Some people were being told they were going to get savings when actually they were being put on a worse deal. People were expecting savings and were not getting the levels of savings, people were being told direct debit levels that made it sound like they were going to be better off when in fact they were worse off. What we need and what we expect from energy companies is they have a culture of putting consumers first and complying with the rules. Clearly SSE management were not doing that which is why we imposed the largest fine on energy suppliers we have ever imposed.”

SSE wasn’t the only culprit – EDF Energy last year admitted to breaking marketing rules. Scottish Power, Npower and Eon are under investigation and could be next. Utility Week sums up the reaction from government, opposition, and consumers groups. It says SSE has taken some steps to make amends. It set up a £5 million compensation pot in December 2011, of which some £400,000 has been claimed. Executives have today been apologising profusely all over blogs, radio and TV.

Centrica (Scottish Gas) has been the one Big 6 company to escape criticism of its sales operations. However, Unions condemned them after they pocketed £16.4 million in pay and bonuses. Centrica’s annual report shows that its British Gas residential arm made £606m in profits. The figures for last year include almost £5m for chief executive Sam Laidlaw, who saw his basic salary of £950,000 topped up through a combination of bonuses and long-term share awards from prior years, totalling more than £2.6m. British Gas boss Phil Bentley saw his total remuneration leap to £3.1m in 2012 from £2.1m a year earlier. TUC general secretary Frances O’Grady said: “At a time when the poorest households are struggling to make ends meet and are spending over a quarter of their incomes on fuel bills, these huge payouts are insensitive beyond belief. We keep being told that bills have to rise to pay for investment in our future energy supply. However these figures suggest that the price rises are in fact being used to fund exorbitant pay hikes.”

Then we have inaccurate billing. Energy companies are among the worst offenders for sending out inaccurate bills. Only HMRC rated worse among consumers who voted energy suppliers as one of the biggest culprits for the seventh year in a row in an annual uSwitch survey. More than a third of households have unexpectedly found themselves owing money because of a discrepancy between an estimated and actual bill. More than one in ten has unexpectedly ended up owing between £200 and £400, while 6 per cent have owed more than £500. Ann Robinson, director of consumer policy at uSwitch.com, said: “Consumers are paying more for their energy than ever before, so the fact that millions continue to be plagued with inaccurate bills is simply unacceptable. Billing blunders are not just costly, but can also take time and effort to sort out, leaving consumers both frustrated and out of pocket.”

All in all, not a good week for energy companies. But will they really change?

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