E.ON fined £7.75m for overcharging customers again
E.ON, one of the UK's six biggest energy suppliers, has been fined £7.75 million by energy regulator Ofgem for overcharging 48,000 customers.
Ofgem said it will force the firm to hand the money to Citizens Advice in order to help vulnerable customers.
The size of the penalty, the regulator said, reflects "repeated failing against Ofgem's billing rules" after E.ON was found to have incorrectly charged exit fees and/or overcharged customers following price rises.
According to Ofgem's rules, suppliers must give customers 30 days' notice of a price rise, giving them the time to switch to avoid the price rise. If the customer does tell the supplier they wish to switch within 30 days, they will not incur any exit fees or pay any part of the higher prices – even if they switch after the bill rise comes in.
But E.ON failed to do this when introducing price rises in January 2013 and January 2014, which affected direct debit and standard credit customers. As a result, it has refunded around £8-£12 to 48,000 customers.
In a statement, the regulator said: "This error and the delay in providing the information is serious and E.ON has failed to protect these consumers. Ofgem has taken this into account in determining the level of penalty."
But this is not the first time E.ON has been caught overcharging customers. In November 2012 it was forced to apologise to 94,000 customers for two separate incidents – in 2008 and 2011 – when it made mistakes while issuing price rises. It had to repay £1.4 million to those affected and gave £300,000 to charity Age UK to help vulnerable customers.
Moreover, in May 2014 E.ON received the largest ever fine by Ofgem for mis-selling energy to 465,000 customers between June 2010 and December 2013.
Playing by the rules
Sarah Harrison, senior partner in charge of enforcement at Ofgem, said: "Ofgem's rules give customers a chance to avoid exit fees and higher costs when suppliers put up prices. These are important customer protections and it is vital that suppliers play by the rules so customers are encouraged to engage in the market.
"E.ON's errors meant customers who took the chance to switch were wrongly charged. It is important that E.ON has repaid potentially affected customers and cooperated with the investigation. However it's absolutely unacceptable that E.ON failed to provide these vital customer protections yet again and this persistent failure is the reason for the high penalty."
E.ON said in a statement: "The company sincerely apologises to those affected. E.ON has agreed with Ofgem to carry out an independent external audit relating to the specific breaches and to implement any appropriate recommendations.
"E.ON has been open and transparent about this failure to Ofgem and has agreed to make a payment to Citizens Advice which will be used to support its Energy Best Deal Extra engagement programme, which provides face to face energy advice.
"E.ON is committed to ensuring that no one will lose out financially and is pleased that the payment is going to a worthwhile cause that will provide support to those in need."
Those affected by the latest error do not have to do anything. E.ON says those affected have either been refunded already or will automatically receive a refund soon.
The practice of a dishonest salesperson misrepresenting or misleading an investor about the characteristics of a product or service. For example, selling a person with no dependants a whole-of-life policy. There have been notable mis-selling scandals in the past, including endowment policies tied to mortgages, employees persuaded to leave final salary pensions in favour of money purchase pensions (which paid large commissions to salespeople) and payment protection insurance. There is no legal definition of mis-selling; rather the Financial Services Authority (FSA) issues clarifying guidelines and hopes companies comply with them.