Did you know that in the last few years, a total of £44 million has been paid by energy suppliers in fines to Ofgem?
In the UK, millions of customers use energy brokers on a regular basis. From homeowners to businesses, energy contracts are changed every day. However, some firms don’t act within the rules and mis-sell energy to their customers.
For just the last decade, £389m, the equivalent of £100k-a-day has been paid out in fines by energy suppliers to Ofgem.
This is for breaking the guidelines around energy. Some of the biggest energy companies in the industry have failed their customers and missold energy, leading to punishment.
But what is missold energy? Which companies in the UK have been misselling energy? What is Ofgem’s role in this?
This guide is to help you understand how it all works, giving you a clear picture of how some energy suppliers and brokers can cross the line. Let’s take a look.
What Is Mis-Sold Energy?
Firstly, not all energy brokers and energy suppliers are bad. The majority will operate with honesty, helping their customers find the best energy deals. However, there are times when companies and brokers use illegal tactics to sell energy.
Some examples of misselling energy include:
| Inaccurate statements | This can be using inaccurate and misleading statements to make a sale. This could be telling customers that they’ll save money by switching suppliers, however, this will be a more expensive contract, advising that competitor prices were higher than they actually were. |
| Brokers commission | Energy brokers must fully disclose information regarding their commission to their customers. However, some brokers are not fully transparent, saying they provide a free service or have an “introducers fee”. Meanwhile, brokers often receive their commission directly from the supplier they place you with, built into the unit price of your contract. This is where brokers don’t disclose the true information. |
| False information | Sometimes, by using false details like letters of authority, changes of occupation and energy meters, this can lead to mis sold energy. |
| Favouring and misconduct | There are cases of companies favouring suppliers that provide brokers with the best incentives, selling these contracts with better benefits. Through misrepresentation and negligence, there is a failure to provide sufficient care in advice, with the number of suppliers searching for ‘best price’. Some misconduct examples include offering fictional price comparisons and agreeing to contracts without the consumer’s consent. |
Who Is The Governing Body For Energy Suppliers?
Ofgem is the governing body for energy suppliers. The Office of Gas and Electricity Markets act as the energy market regulator, helping to ensure energy suppliers comply with the rules for customers.
All energy companies must meet certain standards, fulfil their social and environmental obligations as well as respond to complaints.
How Do Ofgem Manage Energy Mis-Selling?
Ofgem works closely with the energy market to make sure that customers have fair treatment when it comes to energy selling. They aim to prevent harm to consumers before it happens, blocking potential breaches of non-compliance.
When companies are unwilling or unable to cooperate fix matters, it will likely lead to Ofgem opening an investigation. This will include looking into company activities that may have breached one or more conditions of their licence.
How Do I Know If I Have Been Mis-Sold An Energy Contract?
When you sign an energy contract through a broker, they must be fully transparent about how much commission they were getting from the energy company. Their role is to act within the customer’s best interests, locating and recommending the best deal for them.
However, when mis-selling happens, the energy broker may recommend the supplier that gives them the best commission rate. If you weren’t told how much commission the broker would receive for your energy contract, you may have been sold the best deal for them through a ‘secret’ or ‘hidden’ commission.
What Is An Energy Broker?
Energy brokers are the bridge between customers and energy suppliers. They don’t supply or own the energy and they cannot sell energy straight to you. Their job is to provide the rates of a supplier or wholesaler. Most energy brokers will be focused on business energy.
Which Energy Companies Have Mis-Sold Energy?
Unfortunately, the list of energy companies and brokers that have missold energy is long and growing. Supposedly reputable companies have been guilty of breaching rules, leading to fines from Ofgem. Below is a table highlighting some of the notable cases.
| BES Commercial Electricity and Business Energy Solutions | In recent news, Business Energy Solutions (BES) have been accused of mis-selling energy supply contracts, as well as posting fake customer comments online. They are under investigation for missold energy, as well as allowing sales representatives to mis-sell contracts. |
| E.ON | E.ON were forced to pay £12 million after an Ofgem mis-selling investigation. They were found to have broken energy sales rules. The energy company were made to compensate all customers that were mis-sold energy, including automatic payments to some vulnerable customers. The firm had poor management arrangements to protect against miss-selling |
| SSE | SSE was fined £10.5 million, a record fine at the time. The energy company were guilty of using misleading and inaccurate statements to customers in order to make a sale. The company provides electricity, gas, broadband and phone services to homes in the UK. Energy Minister Michael Fallon stated he had “rarely seen a worse case of consumers being misled so badly.” |
| Economy Energy | In 2013, after mis-selling and management failings, Economy Energy had to pay a fine of £250,000. Ofgem has identified systemic failures in their management oversight, leading to the big fine. This was paid to help Citizens Advice provide energy advice to consumers. |
| British Gas | One of the biggest energy companies in the UK, British Gas were fined £1 million by Ofgem for mis-selling energy. Customers in Sainsbury’s stores and Westfield shopping centre were mis-sold to, as well as staff and branding in Sainsbury’s stores not showing the clear relationship between British Gas and Sainsbury’s Energy. |
What Happens To Fines By Ofgem?
When an energy supplier breaks the rules and is fined by Ofgem, there can be penalties for tens of millions of pounds. But where does all this money go? Through Ofgem’s innovative redress process, suppliers may decide to make penalty payments to charitable organisations.
In just the last few years, a total of £44 million has been paid by energy suppliers for letting customers down. Whenever Ofgem investigates and finds a company of wrongdoing, such as failing customers, they pay a penalty.
Some of these fines may go towards helping energy consumers as well as being added to the Treasury as a traditional fine. Ofgem will always ask energy companies to make payments to customers that have been directly impacted by their failures. Ofgem will also insist companies have to pay additional penalty money for amendments.
This additional money will benefit energy consumers, as it is directed to energy charities, trusts and organisations as part of the Ofgem statutory duties. These initiatives have led to hundreds of thousands of consumers seeing these changes over the last five years.
Who Does Energy Mis-Selling Fines Help?
The fines that energy companies pay will help energy consumers. This can be from paying for energy-efficient building improvements for homes to advising struggling consumers to keep on top of their bills.
In just 2014 and 2015, over £70 million was given to charities as well as 223,000 energy consumers seeing benefits too. Also, during this time compensation was paid directly back to those customers who were affected.
How Far Back Can You Go When Making A Energy Mis selling Claim?
If you think there is a problem with your energy bills, or notice a mistake from your energy supplier, then you have a time limit of 12 months to make a claim. If you decide to claim after this time, you haven’t sorted the issue, you should speak to the Energy Ombudsman.
This report to the Energy Ombudsman must be done within 12 months of when you first reported the problem to your supplier. Meanwhile, it should be noted that there isn’t a set timeframe for how far you can go back.
If your supplier made a mistake two or more years ago, for example, the Energy Ombudsman may open the case and look into the complaint for you. But you should always raise the claim as soon as you have any issues.
What Are Energy Selling Scams To Look Out For?
There are common techniques of mis-selling energy, such as aggressive sales methods and criminals pretending to be energy supplier representatives selling illegitimate and useless products.
Always ask energy brokers for their commission rates and try to remain vigilant and aware when dealing with them. There are some great offers out there and you can definitely save money, however, with more brokers entering the market, there is an increase in cowboy energy brokers.
Another method is selling you a contract back to the same supplier you are currently with. The broker will more likely earn their commission, however, you would probably save more money by switching suppliers.