Utility giant SSE has apologised “unreservedly” to customers after learning it is to be fined a record £10.5 million for “prolonged and extensive” mis-selling.
Energy watchdog Ofgem said it found “failures at every stage of the sales process” across SSE’s telephone, in-store and doorstep selling activities, adding that the level of the fine reflected the seriousness and the duration of the mis-selling, as well as the harm caused to customers and the likely gain to the company.
SSE provided “misleading and unsubstantiated statements” to potential customers about prices and savings that could be made by switching to SSE, according to Ofgem.
Management at SSE – one of Britain’s “big six” energy suppliers – failed to pay enough attention to compliance, which allowed the mis-selling to take place, added Ofgem.
Ian Marlee, managing director for markets at Ofgem, told the BBC Radio 4 Today programme: “This is a woeful catalogue of failures by the SSE management.
“This fine represents the fact that what they were doing was allowing a culture of mis-selling to continue, they weren’t doing enough to prevent sharp selling practices from their selling agents, they actually provided misleading sales scripts.
“Some people were being told they were going to get savings when actually they were being put on a worse deal. People were expecting savings and were not getting the levels of savings, people were being told direct debit levels that made it sound like they were going to be better off when in fact they were worse off.
“What we need and what we expect from energy companies is they have a culture of putting consumers first and complying with the rules.
“Clearly SSE management were not doing that which is why we imposed the largest fine on energy suppliers we have ever imposed.”
The fine will be paid to the Treasury, Mr Marlee said.
Consumer Focus welcomed Ofgem’s decision to fine SSE for the “systemic failure” in its direct selling operations.
Adam Scorer, director of policy at Consumer Focus, said: “This is not a case of one bad apple or one rogue sales team. The problems at SSE affected the whole direct selling operation and represent a fundamental failure at one of our biggest energy companies.
“Other companies have also broken direct selling.
“This has been a stain on the energy market since the introduction of competition. While the situation has got better and many companies have decided to end doorstep sales, the recent history casts a long shadow and Ofgem are right to take this scale of action.
“Consumer Focus fully supports Ofgem’s case for greater powers to benefit consumers rather than the exchequer.”
SSE, which has around 10 million domestic customers in the UK, stopped doorstep selling in July 2011, but Ofgem said failures continued over the telephone and in store.
SSE said it was “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”.
It insisted its sales practices have been overhauled since Ofgem launched its investigation, but admitted that it did not move fast or far enough.
As well as halting all doorstep selling, SSE has also brought all domestic telesales in-house, launched a new training programme for sales staff and set up a post-sales verification process.
The group has restructured, creating a retail division and hiring externally to head up the new team, with a new director of sales also brought on board.
Bonuses were withheld for its three executive directors in 2012 as a result of the mis-selling breaches, it added.
SSE set up a £5 million fund to cover mis-selling compensation claims and sent out 970,000 letters to existing customers last year alerting them to its compensation process.
It said it had already paid out more than £400,000 to several thousand customers.
SSE corporate affairs director Alan Young said the firm was “very sorry” about the breaches of the rules.
He told the BBC Radio 4 Today programme: “What we were doing was not adequately telling people about the terms and conditions of their contract or adequately making sure they had the information they needed to switch.
“In July 2011, we were the first energy supplier in Britain to stop selling energy on the doorstep.
“We have set up an independent compliance unit to make sure, to monitor, to audit, to randomly check energy sales across all channels now so customers can have the assurance when they are dealing with us there are safeguards in place and proper structures.
“We have totally reformed our business in this area, we have restructured it.”
Mr Young defended the management team still being in place, insisting SSE was one of the “best companies in Britain”. He said the firm invested more in the UK than it makes in pre-tax profits.
Any customers who believe they have been mis-sold to by SSE should contact its dedicated line on 0845 0707 388.
Ofgem has now finished two of four mis-selling investigations launched in 2010, but inquiries are still ongoing relating to Scottish Power and npower from this time, while it launched an investigation into E.ON’s energy sales practices last April.