Energy supplier E.ON will pay a record £12m to vulnerable customers after an investigation found it broke energy sales rules over a three-year period.
Video: Culture and Digital Editor Paul Mason reports
Regulator Ofgem said the redress package reflects the harm caused by E.ON’s extensive poor sales practices between June 2010 and December 2013.
Given the large number of contracts signed in this period Ofgem said it was likely a large number of customers were mis-sold to 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 their customers who are normally recipients of the 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 on energy companies for various rule breaches, including £39m for mis-selling.
Among other energy companies, npower said in December it would pay £3.5m in redress to customers after it was found to have breached rules.
Scottish Power paid £8.5m to customers in 2013 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” mis-selling.
E.ON’s fine from Ofgem was a nominal £1 as Ofgem decided the £12m penalty should go to vulnerable customers rather than the treasury.
Energy Secretary Ed Davey said: “It’s right that if energy companies aren’t fair to their customers, then they’re penalised – and their customers benefit.
“That’s why we introduced legislation to ensure Ofgem can take tough action in these cases, including making the company pay compensation to the people affected.”