OFGEM has condemned the UKís flagship energy supplier, British Gas, for making false, over-exaggerated claims to prospective customers.
The regulator said that British Gas sales staff wilfully made erroneous comparisons between suppliersí deals. As such, the energy giant profited from extravagant claims made about savings available to customers who unwittingly chose to switch to one of its own tariffs.
The energy provider has compensated 4,300 customers who enlisted to Sainsburyís Energy & British Gas tariffs between February í11 and March í13. The amount of compensation paid stands at an average of £130. Those hoodwinked who have not been able to be contacted, numbering around 1,300, will not be personally compensated. But, their dues will go into a fund to aid mistreated customers.
Handling the matter in resolute fashion, OFGEM has shown that it is not prepared to allow the large energy suppliers to make a mockery out of the rules. The total compensation cost amounts to £566, 600 with a further £434, 000 as part of the penalty. This can be seen as a mere slap on the wrist, though, as harsher sanctions have been dealt out to noncompliant energy companies in recent years.
For instance, E.On settled for a record £12m penalty fee for their role in phone and doorstep mis-selling, not including the subsequent compensation payments of between £3 and £8million.
"Ofgem expects all suppliers to put this poor behaviour behind them and really start acting in a way that will help consumers trust energy suppliers. Where they don't, Ofgem will act," said Sarah Harrison, of Ofgem.
These punitive measures mark the inception of the regulatorís biggest investigation into the energy sector to date. Following OFGEMís referral of the much maligned industry to the CMA, the so-called ëbig sixí energy suppliersí profits will be under intense scrutiny for the next 18 months.
British Gas staff failed to point out to potential customers that Sainsburyís energy subdivision was a branch of British Gas. They then compared monthly direct debit bills to those for customers whoíd made quarterly payments. In this way, the supplier exaggerated the hypothetical savings available.
British Gas said it had discovered the matter through its own internal assessment, before taking ëswift and decisiveí action to compensate all affected clientele and then contacting OFGEM.
"We are very sorry and have ensured no customer will be out of pocket as a result," said Ian Peters, managing director of British Gas Residential.
Billing issues are a recurring problem for consumers with one fifth of households being billed incorrectly by the industry this year. The stuffiness of the administrative infrastructure within the energy sector has suffered much criticism with companies taking longer than ever to address complaints.
With so many cracks appearing on the surface already, the regulatorís exploration will seek to purge the corruption from the belly of the beast over the next 18 months.