E.On energy supplier to pay record £12m for mis-selling
Energy giant E.On is to pay out £12m to some of its customers following an investigation into mis-selling by the industry regulator.
Ofgem said it was the largest penalty paid to date by a UK energy supplier.
Its investigation found "extensive poor sales practices" amongst staff selling on the doorstep and by phone.
E.On has apologised to its customers, and has promised to pay compensation to anyone who was mis-sold an energy package.
The company has estimated that the bill for compensation payments is likely to be between £3m and £8m, on top of the £12m penalty.
End Quote Tony Cocker E.On chief executive
I am personally absolutely devastated by this”
"I am personally absolutely devastated by this, and I'm sure my colleagues across the country are equally devastated" said Tony Cocker, E.On's chief executive.
He told the BBC he took full responsibility for the failings, but said he would not be resigning as a result.
However he said his bonus for the year to 2013 would be cut by "around 25%", resulting in a payment of £510,232.
His bonus in 2012 was £687,300.
In total pay was cut from over a million pounds in 2012, to £945,286 in 2013.
From the earliest days of retail energy competition, when households were given a choice of their energy supplier, consumer groups have warned about sharp practices and pressurised selling techniques.
The firms and the regulator repeatedly claimed that they were addressing the issue. Yet today's news suggests problems continued right up to the end of last year.
E.On insists that there was no organised attempt to mislead or misinform customers. Yet at a time when energy prices were soaring, the fact remains that the actions of E.On and other firms meant that hundreds of thousands of customers did not get the best deal.
The industry says the days of pressurised telephone sales and doorstep selling are behind it. But today one of the leading consumer groups has warned that we can't simply draw a line under the affair and that we should remain vigilant.
Consumer trust in the energy suppliers has collapsed in recent years. Few issues can have done more to erode that trust than the prolonged and sustained mis-selling of gas and electricity to hard pressed households.
Other directors have had their bonuses cut by up to 50%.Payments
The mis-selling took place over a three-and-a-half year period, between June 2010 and December 2013.
Customers were misled by sales staff, and some may have been sold more expensive tariffs than they were already on with other companies.
E.On was the last of the big six energy suppliers to stop doorstep selling, in September 2012.
It said it had now stopped all cold-calling by telephone as well.
The £12m penalty will be distributed to 333,000 of the company's poorest customers.
Those who receive the Warm Home Discount - pensioners, disabled people and low income families - will receive £35 each, even though they were not necessarily affected by the mis-selling.
Other vulnerable customers will also receive automatic payments.
In addition, the company will be writing to 465,000 other customers to advise them how to complain if they believe they were the victims of mis-selling.
Or they can call the company directly, on 0800 0568 497.
The regulator said that E.On had opportunities to improve its sales practices long before 2013, but its response was inadequate.
In addition, Ofgem said that E.On had
- failed to train and monitor its own staff, as well as staff employed by agencies
- provided incorrect information to customers
- failed in its management arrangements
- paid insufficient attention to energy sales rules
- had poor auditing results
- did not always give the key terms of a contract before it was signed
Sarah Harrison, senior partner in charge of enforcement at Ofgem said: "The time is right to draw a line under past supplier bad behaviour and truly rebuild trust so consumers are put at the heart of the energy market.
"E.ON has today taken a good step by accepting responsibility for its actions and putting proper redress in place."
The energy watchdog has imposed nearly £100m in fines and redress on energy companies for various rule breaches over the last four years, £39m of which have been for mis-selling.
E.On was itself fined £1.7m by Ofgem in November 2012, for overcharging customers. The company blamed a computer error.