SSE fined record £10.5m by Ofgem

Energy supplier SSE has been fined £10.5m by the regulator Ofgem for mis-selling gas and electricity.

The fine is the largest ever imposed on an energy supplier by Ofgem.

In its statement, Ofgem said SSE, formerly known as Scottish and Southern Energy, was guilty of management failures that led to "prolonged and extensive" mis-selling.

SSE said it was "deeply regretful" about the mis-selling, and apologised to its customers.

The mis-selling related to telephone, in-store and doorstep sales, Ofgem said.

It said customers contacted by SSE were exposed to misleading statements, inaccurate and misleading information on SSE's charges, and misleading comparisons between SSE's charges and costs of other suppliers.

Some customers were told they would save money when in fact they were switched onto a more expensive contract.

In one example, a script used in doorstep selling described how "a government thing called deregulation... results in your energy prices being lowered by doing nothing at all". This was found to be inaccurate and misleading.

Other examples of misleading action included:

• Telling a woman who was paying £1,600 a year for gas and electricity that she would pay £1,423 by switching to SSE. In fact, she was put on a tariff that resulted in her paying £134 more than her existing deal

• A woman decided to switch to SSE after being told her monthly direct debit would be £81. But this had been set too low to cover her usage and probably led to her owing the company £100 at the end of the year

• A customer who had decided to leave SSE because it was increasing gas prices by 9% was told that the firm she was moving to was raising bills by "14% combined". This was not true. It was increasing gas prices by 7% and electricity prices by 7%.

'Clear message'

The in-house auditing of selling practices was also found to be inadequate. The people employed to audit doorstep sales received a commission on sales, giving them an incentive not to report bad behaviour.

SSE stopped doorstep sales in 2011, but mis-selling continued in stores and over the phone.

Ofgem said the fine reflected the severity and duration of the breaches.

"Ofgem's findings show SSE failed its customers, mis-sold to them and undermined trust in the energy supply industry," said Sarah Harrison, Ofgem's senior partner in charge of enforcement.

"These failings did not just take place on the doorstep but also in the management of SSE. Ofgem's fine reflects an absence of effective management control over energy selling."

She said the fine sent a "clear message" to energy suppliers who failed to treat customers fairly.

Ofgem told the BBC the fine would be paid to the Treasury, as the regulator does not have the power to force energy companies to reimburse customers.

Chancellor George Osborne described the £10.5m fine as a "damning indictment" of SSE's business practices and said future changes to the law would ensure that customers received money from fines directly.

In the meantime, SSE has created a £5m mis-selling fund from which affected customers can receive compensation.

'Very sorry'

The company, which made profits of £1.3bn last year, told the BBC that it had sent out nearly a million letters about this since early last year, and had so far paid out £400,000.

Speaking on the BBC's Today programme, SSE corporate affairs director Alan Young said the firm was "very sorry".

"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.

"We have totally reformed our business in this area."

The SSE case is the second of four mis-selling cases that were launched by Ofgem in 2010.

In March 2012, EDF Energy agreed to pay £4.5m pounds to vulnerable customers following breaches to marketing rules.

Investigations into Scottish Power and Npower are continuing. An investigation into E.On was launched in April last year.