Power firm agrees to pay £4.5m to needy in fine deal

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An energy company whose sales staff made misleading claims to customers has agreed £4.5m for needy households as part of a settlement with the regulator.

Ofgem said EDF Energy’s doorstep staff failed to provide potential customers with complete information during the sales process, while those in its call centres made claims about savings before knowing their statements were accurate.

In the wake of its marketing licence breaches, EDF has agreed to set aside £3.5m for a £50 refund to about 70,000 customers who have received its Warm Homes Discount.

It will also be making a £1m donation to an energy awareness campaign being run by Citizens Advice.

Ofgem said customers would be better served by EDF making payments to benefit those customers in need, rather than imposing a fine. It said that by accepting some shortcomings in its sales practices EDF had escaped a bigger penalty.

The regulator said it was continuing its investigations into sales practices at Scottish Power, SSE and npower.

Sarah Harrison, Ofgem’s senior partner in charge of enforcement, said: “In the energy market in general much more needs to be done to restore consumer confidence and all energy suppliers should now get behind Ofgem’s reforms to introduce a simpler, clearer and more competitive energy market.”

EDF said it acknowledged “limited shortcomings” in some elements of its sales processes during 2010.

Martin Lawrence, managing director of energy sourcing and customer supply, said: “We’re obviously disappointed that we failed to live up to the high standards that we expect of ourselves. As soon as the issue was identified we immediately took action to satisfy ourselves that we’re fully compliant.”

Ofgem said customers were not always provided with complete information during the sales process and call centre staff sometimes made opening statements in their calls to customers that claimed savings before knowing whether the statements were accurate for the specific customer on that call.

Audrey Gallacher, director of energy at Consumer Focus, said it was positive that an energy company has worked with the regulator to tackle the issue.

She added: “We’ve called for Ofgem to have the power to make sure energy customers benefit from any fines – so it’s good news that this voluntary approach has led to customers being compensated rather than money returned to the Treasury.”

Energy and Climate Change Secretary Ed Davey said tougher rules were now in place.

He added: “We are now looking at beefing up Ofgem’s powers further so it can make companies compensate consumers directly in cases like this, rather than having to rely on a voluntary approach.”