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EDF Energy pays £4.5m back to customers – it’s about time

An energy company does something it shouldn’t. What usually happens? Ofgem slaps said company on the wrist, fines it a million or two and the money goes straight into the Treasury’s coffers. Well, not today.

Ofgem’s investigation in to EDF Energy’s sales and marketing practices has resulted in £4.5m being given back to vulnerable customers. This is a break from the norm and is definitely a step in the right direction.

Recent Which? investigations in to energy company sales and marketing have revealed that EDF is not the only company failing to tell energy customers about their best deals.

There’s more evidence that doorstep sellers didn’t always provide enough info to properly compare deals and that telephone staff gave potential savings without knowing enough about the customer’s current deal.

Of course, if Ofgem had found individual cases of consumer detriment in its investigation then we would be pushing both the regulator and EDF to make sure that those who had been affected got compensation. But since this isn’t the case, it’s good to see both parties finding a way forward that gets cash out to those who need it most.

So what’s stopping Ofgem from taking this approach with future fines or penalties?

Give money back to energy customers

Ofgem’s still investigating three energy companies’ sales and marketing practices, so could we expect more windfalls for consumers who may have been mis-sold tariffs?

Ofgem definitely wants to repeat this approach, but has said it needs new powers from the government to ensure that consumers definitely get financial redress, rather than the Treasury reaping the rewards of energy company misbehaviour.

We’d heartily support this move. In January we called for Ofgem to have further powers to make sure energy companies properly deal with customer complaints. So the government needs to make sure the regulator has everything it needs to keep the industry in check – and do it soon.

If Ofgem does get these powers, then there’s one further thing that needs to be looked at. Where is this compensation going to come from? If it’s simply taken from our bills, then it sounds like a case of robbing Peter to pay Paul.

Shouldn’t compensation be taken out of shareholders’ dividends instead? And wouldn’t this provide a much greater motivation for companies to make sure they smarten up their act and treat their customers fairly?

Comments
Member

Glad to see it went back to the customers (the injured party) rather than to the treasury in the form of a fine, which has been the case many times before.
On these previous occasions the injured party has effectively been penalised because the only income the guilty energy supplier has comes from their customers, who are the victims and who effectively end up paying the fine through higher prices. That never seemed fair to me.

Member

£1 million goes to Citizens advice, £3.5 million goes to vunerable customers.
Whether this money goes to treasury or customers, all EDF customers lose out because as Chris has said, higher prices down the line result, to claw the money back.

I support which? attempts for change I really do, but you’re shooting at the wrong target!

There are laws are in place under the regulation act, which enforce the “Hampton principles” (or “risk based assessment”) across all regulators and enforcement bodies.
One of these principles is that any regulator/enforcement body proposing to take action against a business which is deemed to be “compliant with the regulator previously” MUST consider the “needs of the business concerned”
If the action will cost the business money or hamper their ability to trade, it is viewed as a detrimental, and cannot be enforced.

Could which? make attempts to get OFGEM to answer a simple question please?
By paying out this money, have EDF maintained their “compliant” status with the regulator and energy enforcement bodies?
I suspect from the ignorance of OFGEM when I ask them, the answer may well be a yes!

If they remain as “compliant” in OFGEM’s view, then enforcement action cannot be taken against them, they will continue to receive no inspections, be able to submit their own information and in a limited form.
This would also explain why OFGEM’s fine, imposed on EDF was reportedly just £1

On a wider point for all energy customers – take a look at the office for national statistics and their graphs and records for energy pricing for the year 2005 onwards.
Amazingly, a declaration by the government to implement the Hampton report in full (hampton principles) for regulators/enforcement bodies, resulted in energy prices shooting up ever since!
Coincidence? I think not.

If “risk based assessment” (read: Hampton principles) are removed from regulators/enforcement bodies codes of conduct – it is “flawed” according to the FSA in the RBS £45 billion collapse – then and only then will we see regulators with teeth and power in all areas, acting in the interest of consumers instead of the “needs of the business”