Energy giant fined £2m for 'mis-selling'

The UK’s fourth largest electricity and gas supplier is facing a £2m (€3.1m) fine after its sales agents were found to have used unscrupulous selling tactics to gain new customers, energy regulator Ofgem announced today.

The proposed penalty, the first of its kind in the UK, follows a four-month investigation into methods used by agents working for London Electricity and Virgin HomeEnergy.

Staff are alleged to have filled in forms authorising a switch of supplier using names and addresses obtained from the electoral register at public libraries.

People were also said to have signed what they thought was information about compact discs and holidays only to discover later that they had changed supplier.

The LE Group, which owns London Electricity and 75% of Virgin HomeEnergy, now has 21 days to object to the proposed fine after which Ofgem will decide whether to withdraw, vary or confirm it.

Richard Branson’s Virgin Group today warned they may withdraw LE Group’s right to use its name because of the problems over mis-selling.

Callum McCarthy, chief executive of Ofgem, said: “The record of London and Virgin Energy in the mis-selling of gas and electricity since the beginning of the year has been completely unacceptable.

“They are in clear breach of the rules governing direct selling.

“This sends out a strong signal to any other companies performing badly in this area.”

The LE Group has around five million residential and business customers in the UK, 250,000 of whom are with Virgin HomeEnergy.

Complaints over mis-selling spiralled after the gas and electricity market was opened up to competition.

Ann Robinson, chairman of gas and electricity watchdog energywatch, welcomed today’s announcement by Ofgem, saying: “This sends out exactly the right message to companies.

“The industry record on direct selling has been appalling and consumers have been waiting for decisive action against the worst offenders.”

Her views were echoed by energy minister Brian Wilson who said: “Today’s decision sends a clear message to companies that mis-selling is a blight which will no longer be tolerated. It causes confusion anger and, in many cases, distress.”

Jenny Kirkpatrick, chief executive of the Electricity Association (EA) representing industry generators and suppliers, insisted: “The industry is working hard to stamp out malpractice and is beginning to see some progress through EA’s EnergySure pilot accreditation scheme for sales agents.”

Vincent de Rivaz, LE Group’s chief executive said: “I have always said that mis-selling and inappropriate sales practices are totally unacceptable and they will not be tolerated.

“I reiterate that again today and I have been personally involved in stamping out these problems.”

However a statement from the Virgin Group said: “Although Virgin only owns a 25% minority of the business we do have the right to withdraw the brand and have put London Electricity on notice that we may do this.

“We are considering this pending full clarification that all activities of this nature have been permanently eradicated”