Energy companies ‘should pay out for mis-sold doorstep deals’

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Energy companies should pay compensation to customers who were mis-sold gas and electricity contracts on the doorstep, MPs said yesterday.

The Energy and Climate Change Select Committee is concerned that customers bamboozled by the array of complex tariffs for electricity and gas are being pressured by salesmen into contracts with different suppliers no better or even worse than their current one.

Energy regulator Ofgem estimates that 40 per cent of people who switch do not get a better deal.

Select Committee Tim Yeo said: “If it turns out that consumers are being persuaded to switch contracts when it’s not in their best interests, by salespeople keen to earn commission, then it would only be right for the energy companies to cough up compensation.”

He urged the companies to take action themselves without waiting for the Government or Ofgem to act.

Scottish & Southern Energy (SSE), one of the big six group of energy suppliers, recently suspended all of its doorstep activity after being found guilty of two counts of mis-selling in a case brought by Surrey County Council.

SSE, which is appealing against the Surrey verdict, said that the market had changed, with fewer people willing to engage with traditional doorstep sellers.

Mr Yeo welcomed SSE’s decision and urged the rest of the Big Six to ditch the “Del Boy tricks” and concentrate on giving customers the information they need to choose the correct contract.

A spokesman for the regulator Ofgem said: “The Select Committee is right to highlight the issue of compensation for customers. Ofgem’s recent review of the retail market signalled that there may be a case for additional powers for the regulator to better protect and put right problems for consumers.”

The Select Committee also said it is concerned over recent rises in energy prices, the growth in the complexity of tariffs and the dominance of the market by six big suppliers.

Which? estimates that the number of tariffs available to energy customers has risen from 180 to 400 in the past 18 months even though 99 per cent of all domestic accounts have been held by the big six suppliers since 2008.

Scottish Power, which is owned by Spanish firm Iberdrola, was the first of the big six to raise its prices for gas and electricity this year when it increased its gas tariff by an average of 19 per cent and its electricity tariff by 10 per cent.

In its report, the select committee criticises Scottish Power for the way it has structured the increases, claiming those who use the least energy will be hardest hit.

Some 73 per cent of Scottish Power’s pre-payment customers in 2010 came from the doorstep while SSE, which has just announced price increases of 18 per cent for gas and 11 per cent for electricity, said 45 per cent of the new customers gained in the UK came from door-step selling.

Consumer groups welcomed the MPs’ report. Mike O’Connor, chief executive of Consumer Focus, said: “This is a broadside from MPs on whether consumers can trust energy companies to sell fairly, especially on the doorstep. Cold calling on the doorstep should end now.

“Organised confusion, pressured selling, misleading information – no market should be able to operate like that, and especially not one that provides an essential product that is getting more and more expensive.”

It has also been reported that two more of the ‘big six’ energy suppliers are planning to announce big price increases shortly, with Npower and Eon named as those involved.