A POWER company whose sales staff made misleading claims to customers has agreed to a £4.5 million payout for needy households as part of a settlement with the energy 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.
Ofgem said customers would be better served by EDF making payments to benefit customers, rather than imposing a fine.
It said by accepting some shortcomings in sales practices EDF escaped a bigger penalty.
In the wake of its marketing licence breaches, EDF has said it will set aside £3.5m for a £50 refund to about 70,000 customers who received a Warm Homes Discount, a scheme to provide funding for vulnerable householders. It will also be making a £1m donation to an energy awareness campaign run by Citizens Advice.
The regulator added 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 at EDF, said: "We're obviously disappointed we failed to live up to the high standards 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, for example on some contract terms or on the way their monthly direct debits had been calculated and on how estimates of their annual consumption were calculated.
Call centre staff sometimes made opening statements in their calls that claimed savings before knowing whether the statements were accurate, and sometimes assumed the customer was on a standard tariff without checking.
Ann Robinson, director of consumer policy at uSwitch.com, said the move "marks a real turnaround in thinking in the energy industry".
She said: "Both EDF Energy and Ofgem are to be applauded for taking such a grown-up, constructive and responsible approach. Both have worked together to tackle the issue and to then agree a penalty that will actually help consumers.
"It's never good news when a company doesn't follow due process, but this outcome is constructive, consumer-friendly and will help to maintain trust and confidence."
Audrey Gallacher, director of energy at Consumer Focus, said: "We've called for Ofgem to have the power to ensure energy customers benefit from any fines, so it's good news 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 over the information suppliers have to provide. 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."
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