“Change is long overdue in an electricity market that hasn’t worked for customers since Maggie privatised it 25 years ago.”
So energy giant E.On must repay a record £12m to customers mis-sold electricity tariffs. Should ripped-off consumers be cheering?
Well, let’s do the maths. Energy watchdog Ofgem says E.On’s penalty will produce the biggest ever pay-out an automatic £35 each to 333,000 customers on the Warm Home Discount, mostly older people and folk on low incomes.
And they’ll pay out a further £67 each to 465,000 other customers. So E.On’s total pay-out could be as much as £20m. Wow.
It makes you feel a bit sorry for E.On’s bosses and shareholders, so consider this. The company made £300m in the UK last year.
So that record fine represents just 4% of profits. Kinda puts it into perspective, doesn’t it. Three years mis-selling to the poorest Brits results in a fine equal to two weeks’ profits.
And that’s just in the UK. E.On’s parent group in Germany reported global profits of £7.7bn last year alone. Of course boss Tony Cocker says 2013’s massive profits were driven by cold weather and internal
cost-cutting, not exploiting customers. Strange then that profits made by all the energy suppliers rose from £233m in 2009 to a whopping £1.1bn in 2012. Were they all cold winters?
Ofgem also found existing energy consumers always pay more than folk who have just switched. No wonder a recent survey found 43% of customers don’t trust energy companies to be clear and honest about prices.
So where did E.On staff go wrong?
Ofgem found poor sales practices, badly-trained staff, poor safeguards and “an inadequate response” to complaints in 2012. Reading between the lines, that suggests E.On kept “accidentally” selling the wrong policies to vulnerable people for as long as they could get away with it.
Now though Mr Cocker says it was “completely unacceptable” that sales staff were unclear with customers. He says: “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.”
Apparently E.On is now “overhauling its sales processes and had already ended doorstep sales and telephone cold calling”, and Ofgem says: “The time is right to draw a line under past supplier bad behaviour and rebuild trust so consumers are put at the heart of the energy market.”
Well that’s all right then? Is it heck. What real choice do customers have? E.On’s just the latest of the Big Six to have its corporate knuckles rapped for playing fast and loose with customers’ cash.
Ofgem’s imposed £100m in fines in four years, the largest penalty a £10.5m fine for SSE after their telesales agents were found to be using “misleading scripts” and inaccurate estimates with customers.
Are they all at it all the time? If so, what’s the point even shopping around?
The Big Six suppliers Centrica, SSE, RWE npower, E.On, Scottish Power and EDF Energy control 95% of the market for supplying energy. They are too powerful because we have let them become too powerful.
When Ed Miliband announced a Labour Government would freeze prices, break up the big six and dismantle the regulator they warned the lights could go out.
When Ofgem announced its biggest-ever investigation into the Big Six in March they threatened an energy investment freeze. Enough already.
Change is long overdue in an electricity market that hasn’t worked for customers since Maggie privatised it 25 years ago. We need the balance permanently tipped in favour of us. Cos d’you know something? British Gas was right about one thing customers just love being in control.