Energy supplier SSE fined £10.5 million for mis-selling

LONDON Wed Apr 3, 2013 11:55am BST

Steam rises from the cooling towers at SSE's Fiddlers Ferry electricity power station near Liverpool, northern England, January 28, 2011. REUTERS/Phil Noble

Steam rises from the cooling towers at SSE's Fiddlers Ferry electricity power station near Liverpool, northern England, January 28, 2011.

Credit: Reuters/Phil Noble

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LONDON (Reuters) - Utility SSE has been fined 10.5 million pounds for mis-selling, the largest fine the regulator has ever imposed on an energy supplier.

Ofgem said on Wednesday it had found failures relating to telephone, in-store and doorstep sales at SSE "at every stage of the process", including at management level.

"The level of fine reflects the seriousness and duration of breaches, the likely substantial harm that they have caused and the likely gain to SSE," it added.

The fine is a sign that the government and regulator are taking more aggressive action against energy companies that are found to have misled customers, adding to already high retail energy prices.

Ofgem said SSE - which provides gas, electricity, phone and broadband for households - had made misleading and inaccurate statements to customers in order to make a sale.

Examples it gave included telling customers they would save money but switching them to a more expensive contract and telling them competitor price increases were higher than they actually were.

Newly appointed Energy Minister Michael Fallon said that he had "rarely seen a worse case of consumers being misled so badly."

Although SSE's management had not wilfully breached licence conditions, Ofgem said that the board paid insufficient attention to compliance and it was not a high priority for it.

"SSE is deeply regretful that breaches occurred and apologises unreservedly to any customers who have been affected by sales activity which ran counter to the values and culture of the company," SSE said.

It said it had already taken action to remedy the issues raised, including stopping doorstep selling, bringing telesales in-house, and training and restructuring.

SSE has already been fined 1.25 million pounds for doorstep mis-selling by the courts. It has earmarked 5 million pounds to reimburse customers who felt they have been misled.

It has paid out around 400,000 pounds of this so far.

NEW REGULATION

Energy Minister Fallon, who replaced John Hayes last week, said that the government's planned Energy Bill would give Ofgem the teeth it needed in future to get compensation to those directly affected.

"We're using new legislation to require suppliers to simplify their tariffs and get rid of historic poor deals," he said.

End-user lobby group Consumer Focus warned that SSE was not the only energy company that had broken rules.

"This is not a case of one bad apple or one rogue sales team. Other companies have also broken direct selling," Consumer Focus said in a statement.

"While the situation has got better...the recent history casts a long shadow and Ofgem are right to take this scale of action," the group added.

The regulator has also launched investigations into selling practices by SSE, EDF, RWE's npower and Ibedrola's Scottish Power in 2010, and by E.ON in 2012.

Last year, EDF paid out 4.5 million pounds to help vulnerable consumers after Ofgem found it had breached some licence conditions in its sales and marketing.

The investigations into npower and Scottish Power are ongoing.

(Reporting by Rosalba O'Brien and Henning Gloystein)

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Comments (1)
DavidHill wrote:
The latest fraudulent misselling of energy products by SSE (formerly Scottish and Southern Electricity) appears to be a growing trend that has surfaced over the last ten years and where the public’s basic understanding of corporate ethics and integrity is being constantly shattered. Indeed the £10.5 million fine (they were fined £1.25 million in 2012 for the same) is just a drop in the ocean when on considers that SSE made a profit of £397.5 million in only the six months to last September. If we look at the pharmaceutical industry we see the same fraudulent actions being undertaken against the people and where over the last 4 years they have been fined over $13 billion. These companies include GSK, Pfizer, J&J AstraZeneca, Merck, Abbot, Eli Lilly and Allergen. But because these drug companies make such vast profits and revenues, the fines again are a drop in the ocean. As one example GSK with its $3 billion fine for misselling Paxil, Wellbutrin and Avandia and where they sold $27.3 billion of the stuff – 9 times the fine. As pharmaceuticals make at least 50% in before-tax profits, GSK made over $10 billion even after the fine was settled. Another is Pfizer who mis-sold Bextra, Geodon, Zyvox and Lyrica and was fined $2.3 billion (part of that fine was $1.3 billion for criminal liability) but where their revenues were $67 billion. The banks are no different as we all know and where fines have been imposed but where these again have been miniscule when compared to what they have gained. Therefore not until government(s) get to grips with these huge companies to safeguard the people and imposed fines of at least 10% of their profits and directors go to prison, will anything change. For if nothing is done to curb these abuses, government will be complicit, be acting as agent to these fraudulent actions and where eventually they themselves will become liable. Presently these vast companies are literally laughing at us all the way to the bank. Therefore considering these facts it is time that government and the Courts took meaningful action, not just a slap on the wrist and don’t do it again. Unfortunately here again this has not worked in the past as in the case of Pfizer they were fined $430 million through their subsidiary Warner-Lambert for the same violations in 2004. Overall, the people’s trust in the system has to be paramount to sustain a society and its economy. Fraud and allowing fraud to take place is an anathema to this primary requirement of humanity. SSE’s £10 million fine is therefore just another bad joke on society and where we the people have apparently no real justice against the might of big business.

Dr David Hill
World Innovation Foundation

Apr 04, 2013 7:47pm BST  --  Report as abuse
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