Four energy companies face mis-selling probe
- 2 September 2010
- From the section Business
Four of the "big six" UK energy suppliers are to be investigated amid concerns of mis-selling to customers, the regulator has announced.
Npower, Scottish Power, Scottish and Southern Energy, and EDF Energy all face questions over face-to-face and telephone sales of energy contracts.
Ofgem said it had received information from a variety of sources suggesting they could have breached new rules.
The quartet said they would work with Ofgem on the investigation.
Research by the regulator in 2008 found that, of those who switched their energy supplier, more than half did so in response to contact with a salesman.
But it found that many who switched following doorstep sales ended up on a more expensive tariff because they were misled, or found it difficult to compare bills.
As a result, Ofgem brought in new regulations at the end of last year aimed at tightening up the sales process. The new requirements included:
- supplying a customer with an estimate before any face-to-face sales are concluded
- giving, in most cases, a comparison between the new offer and the customer's current deal
- actively preventing mis-selling to customers on the doorstep and over the telephone.
The four energy companies face an investigation into whether these new licence agreements have been breached.
"We expect all suppliers to comply with these tougher obligations, but if our investigations find otherwise, we will take strong action," said Andrew Wright, of Ofgem.
The regulator has the power to fine a company up to 10% of its turnover if a breach is discovered.
Previously, under the preceding mis-selling rules, Ofgem fined Npower £1.8m in 2008. London Electricity - now part of EDF Energy - was fined £2m in 2002.
Views expressed by the four energy companies suggest they will vigorously refute any claims of mis-selling.
David Mannering, the corporate economic regulation director at Npower, said: "We fully support Ofgem in making sure that customers clearly understand the products on offer to them and we are confident that the processes we have in place mean that we comply with our regulatory obligations."
Scottish Power has the highest proportion of complaints per 100,000 customers made to advice line Consumer Direct this year. However, not all of these complaints are necessarily justified, as they are just the view of the consumer.
Its spokesman said the company would answer questions raised by Ofgem.
"Scottish Power insists on the highest standards possible for all of our sales agents, and invests heavily in training and development to maintain these standards," he said.
EDF Energy said that it believed it was fully compliant with the rules, and trained its staff fully, including refresher briefings. All new sales were verified by telephone to confirm the customer's intention to switch.
And SSE said it believed it was complying with the new rules.
"As a responsible company we take seriously all our customers' issues and would ask any prospective or existing customer to contact us if they are concerned, and we will work with them to resolve the situation," SSE said.
Christine McGourty, director of Energy UK, which represents the leading gas and electricity companies, said: "The companies involved will collaborate fully with the Ofgem investigation and are awaiting further details from the regulator.
"The new regulations that cover doorstep selling are part of the industry's EnergySure Code of Practice and members undergo a rigorous independent annual audit to ensure all the obligations are being met.
"Any sales agent in breach of the code will be struck off the approved energy sales register. Companies take their customers' concerns seriously and would urge customers to call them directly with any concerns they have."
Meanwhile, Ofgem is urging any householders who believe they have been mis-sold energy on the doorstep or on the telephone to report the case to the Consumer Direct hotline by calling 08454 040506 and choosing option one.
However, the current system still encourages mis-selling, according to Audrey Gallacher, of watchdog Consumer Focus.
"Complaints have declined since new rules came into effect this year, but suppliers still seem to be flouting the rules," she said.
"Some customers are still being given misleading quotes and information, which leave them worse off when they switch provider.
"While many doorstep sales people will do a good job, the pay and rewards system continues to encourage mis-selling, despite years of regulation and voluntary initiatives.
"If better advice for customers and enforcement of the tougher rules doesn't end the flagrant abuse of this form of selling, the big question will be whether it should be completely banned."