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?