Energy supplier SSE fined £10.5m by Ofgem

Energy supplier SSE fined £10.5m by Ofgem

12 April 2013

SSE, formerly known as Scottish and Southern Energy, has been fined £10.5m by the regulator Ofgem for mis-selling gas and electricity. SSE is one of Britain’s “big six” energy suppliers, and the fine is the largest ever imposed by Ofgem.

Background

Ofgem found SSE guilty of management failures that led to “prolonged and extensive” mis-selling at every stage of the process: telephone, in-store and doorstep sales activities. In addition to this, the in-house auditing of selling practices was found to be inadequate because the people employed to audit doorstep sales received a commission on sales. Although SSE stopped doorstep sales in July 2011, the mis-selling continued in stores and over the phone.

People were expecting savings but in fact they ended up worse off. One woman, for example, who was paying £1,600 a year for gas and electricity, was told that she would pay £1,423 by switching to SSE, but, in fact, she was put on a tariff that resulted in her paying £134 more than her existing deal.

Fine

Because Ofgem does not have the power to require companies to award consumer compensation, the fine will be paid to the Treasury.

Chancellor George Osborne said that future changes to the law will ensure that customers will receive money from fines directly. In the meantime, SSE has created a £5m mis-selling fund from which affected customers can receive compensation.

Other companies under investigation

Ofgem launched the investigation about mis-selling activities in 2010, and the SSE case is the second one. In March 2012, EDF Energy agreed to pay £4.5m to vulnerable customers following breaches to marketing rules. In addition to these two, investigations into Scottish Power and Npower are continuing and an investigation into E.On was launched in April 2012.

What’s next?

As companies offer so many different packages, it is difficult for customers to make the right choice. That is why attempts by the regulator to introduce greater simplicity and transparency into pricing have been broadly welcomed.

All of the big six energy companies increased their prices between October 2012 and January 2013, blaming rising wholesale power and other costs. But official figures showed they had more than doubled their retail profit margins over the last 18 months and were now earning an average of £95 profit per household on dual-fuel bills.

According to official figures, SSE made profits of £1.3bn in 20012, which means the fine of £10.5m is a small proportion of the cash generated year-in and year-out by SSE. And according to Mr Young, Corporate Affairs Director, no senior executive has been dismissed as a result of the Ofgem investigation; only their bonuses have been reduced.

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