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ScottishPower’s £8.5m ‘fine’ for mis-selling stays out of the headlines

Just one day after Npower‘s record 10.4% price hike you might have thought that this morning’s announcement by energy regulator, Ofgem, that Scottish Power is the third of the Big Six to be found guilty of misleading the public, with investigations against Npower and E.On still ongoing, would have been top of the BBC News headlines. So why wasn’t it? Why did it hardly get a mention? Why did it largely sink without a trace?

Let’s face it, what the regulators call “misleading” and “misselling” the rest of us call lying, cheating and defrauding. If you or I were caught doing anything like that they’d call the police. So has that happened with any of the Big Six? How many of their executives have been nicked? How many have done time? How many have even been sacked?

When the energy watchdog, Ofgem, launched investigations into four of the Big Six, Npower, ScottishPower, SSE and EDF back in September 2010 it had already fined Npower £1.8 million in 2008 and London Electricity (now part of EDF) £2 million in 2002. So, as Energy minister Ed Davey said about British Gas last week, they already had “form“.

When the BBC reported the results of Ofgem‘s inquiry into EDF in March last year, the word ‘fine’ had to be enclosed in quotation marks: EDF Energy agrees to pay a £4.5m ‘fine’

The reason? Well, Ofgem‘s own Notice of Intention to impose a financial penalty on EDF says it all:

The Authority considers it appropriate to impose a penalty on EDF Energy for these contraventions. However, EDF Energy has agreed to make payments amounting to £4.5 million which benefit consumers. The Authority considers that the payments offered by EDF Energy will benefit electricity and gas consumers more than would be the case if a significant penalty were to be imposed, so it proposes to impose a reduced penalty of £1. In addition, from an early stage of the investigation, EDF Energy took proactive steps to put corrective measures in place.

Notice of Intention to impose a financial penalty, Ofgem

Well, isn’t that nice! Even though EDF have form for deceiving and defrauding they only get fined £1. Yes, that’s right. Just a quid! Oh that we should be so lucky! Next time you get caught trying to nick a couple of million just tell the judge you’ve ‘put corrective measures in place’ and see how far that gets you!

How far it got EDF is that it allowed them to only plead guilty to failure “to live up to the high standards that we expect of ourselves” and to deny they’ve paid any kind of fine or penalty. Even though, as the BBC is, for once, at pains to point out:

the total of £4.5m includes a £1 penalty

When Ofgem fined SSE a record £10.5 million this April for “prolonged and extensive” mis-selling the BBC did not have to put the word fine in quotes because Ofgem used the word themselves in their own press release:

Wednesday 3 April 2013

  • Ofgem found SSE failures at every stage of the sales process
  • SSE management failures led to prolonged and extensive misselling
  • Proposed SSE fine is largest ever imposed on an energy supplier
Summary of Breaches

Customers contacted by SSE were exposed to misleading statements, inaccurate and misleading information on SSE’s charges and misleading comparisons between SSE’s charges and the costs with other suppliers. These failures meant that many customers were unable to make well informed decisions about whether to switch to SSE and about comparing products in a competitive market and they were exposed to the risk of choosing a more expensive energy deal.

Ongoing investigations into energy sales

Ofgem has now concluded two of the four misselling investigations launched in 2010. The two ongoing investigations from this time relate to Scottish Power and npower. Ofgem opened an investigation into E.ON’s energy sales practices in April 2012.

Previous investigations

Since April 2010, Ofgem has completed 14 full scale investigations. More than £35 million of penalties have been imposed and around £6 million of redress payments have been made to benefit consumers.

Four months ago The Telegraph reported that the only remaining member of the Big Six not under investigation by Ofgem for misleading and misselling, British Gas, had agreed to pay £10m into a trust for vulnerable customers: a “donation” almost level with with the record £10.5 million fine paid by SSE 2 months previously. What was all that about then?

The regulator claimed that between 2006 and 2011, British Gas failed to “round down” the calorific value, a charge that covers the heat or thermal energy in the gas a customer uses.

British Gas last insisted it had done nothing wrong and none of its customers had missed out.

In a statement, British Gas said: “We are making this donation following clarification from Ofgem that, while we believe we were operating in line with the regulations, we accept there was an alternative interpretation.”

Ten days later, on 28 June 2013, Ofgem announced it was closing its investigation under the Competition Act (‘CA 98’) into the behaviour of two trade bodies, the Energy Retail Association (“ERA”) and the Association of Energy Suppliers (“AES”) and “certain suppliers” (i.e. British Gas, EDF, E.On, Npower, SSE and Scottish Power, aka The Big Six) on the grounds of “administrative priority”:

At this stage, and on the basis of the evidence gathered to date, the Authority notes that it is not in a position to make a conclusive finding on whether or not there has been a breach of [the Competition Act]. Furthermore, the Authority considers that its resources would likely be better devoted to further work on the regulatory environment applicable to TPIs [third-party intermediaries aka energy market brokers] seeking to engage in face to face marketing of energy supply, rather than continuing with this investigation.

In the light of these factors, the Authority has therefore decided that it is appropriate to close this investigation on the grounds of administrative priority.

As Utility Week noted in an article a few weeks later, Lid must be lifted on aborted Ofgem probe into big six:

Two weeks ago the government issued a flurry of energy policies. Media platforms from the national broadsheets to Twitter were abuzz with chatter about the capacity mechanism, the renewables strike price, the estimates that 40 trillion cubic metres of shale gas lie beneath the north of England. So no-one noticed when, the day after, Ofgem slipped out a drily worded announcement concerning “the closure of [an] investigation under the Competition Act”. It was closing the investigation on the grounds of “administrative priority”, it said. Or, to put it another way, Ofgem was dropping a cartel investigation into the big six because it had more important things to do.

There will doubtless be two sides to this story – but that’s not the point. The evidence for and against the big six and the TPIs should see the light of day. What “administrative priority” could possibly be more important than assessing whether the six companies that have a stranglehold on the UK market have been acting as a cartel, albeit in a small corner of the market?

Ofgem has already drawn widespread criticism for its failure to refer the energy supplier market to the Competition Commission. The abandonment of this investigation and refusal to reveal its findings add weight to the accusation that it is a regulator without teeth.

Just as Ofgem‘s aborted Competition Act probe failed to reach the mainstream news, so too was today’s announcement of Scottish Power’s £8.5 “fine” buried under a flurry of other news.

Returning to its previous strategy with EDF, Ofgem‘s Notice of intention to impose a financial penalty on Scottish Power says:

The Authority considers it is appropriate to impose a penalty on SP. However, SP has agreed to make contributions amounting to £8.5m in the form of compensation and payments to vulnerable customers. The Authority considers that the payments offered by SP to aid consumers will be of greater benefit to energy customers than if a substantial penalty was imposed. Accordingly, the Authority considers that a nominal penalty of £1 should be imposed.

Here we go again. Only a one quid fine! What kind of discouragement is that? And because Ofgem isn’t calling it a fine, neither are the rest of the mainstream media.

The BBC did report it on its website and on Radio 4, but this time it doesn’t even put the word “fine” in quotes, and we could find no mention of it on the mainstream BBC TV News at all.

The BBC website headline says “Scottish Power to pay customers £8.5m” and the story makes absolutely no connection between that and the current round of energy price hikes.

The Guardian takes more of less the same line as the BBC but does mention the price hikes at the end:

The company is one of the UK’s Big Six energy providers, three of which have announced a sharp rise in prices over recent weeks, inciting anger from consumer groups and politicians.

The Telegraph does make a connection in its headline, “Scottish Power agrees £8.5m mis-selling penalty and warns of price rise to come“, and in the third paragraph of the story:

The penalty disclosure came as MPs on the energy select committee summoned the bosses of the Big Six energy firms to give evidence next Tuesday about the “reasons and justification behind recent energy price rises”.

(Scottish Power agrees £8.5m mis-selling penalty and warns of price rise to come, The Telegraph, 22 Oct 2013)

With another reminder in the penultimate paragraph:

Scottish Power, owned by Spain’s Iberdrola, is the third of the “Big Six” to have been found to have breached sales rules after SSE, which was fined a record £10.5m, and EDF Energy, which agreed a £4.5m compensation deal in lieu of a penalty.

Two others energy giants – E.On and RWE npower – are still under investigation by the regulator.

The Mail pushes the boat out a little further with the headline: “ScottishPower to give £8.5million back to its customers after mis-selling scandal” and in a bullet points subheading: “Energy firms to be hauled before MPs’ committee to explain price rises”. And, in sharp contrast to The Guardian, The Mail gives Labour’s Shadow Energy and Climate Change Secretary, Caroline Flint, an opportunity to push the boat out even further:

This is yet more evidence that Britain’s energy market is broken.

Scottish Power is the third energy company to have been caught out misleading the public and two more are still under investigation.

Caroline Flint, Shadow Energy and Climate Change Secretary, The Mail, 22 October 2013

So, reading between the lines (but only in the traditionally right-wing press strangely) it is possible to infer that the Big Six might be misleading us over the price hikes in the the same way they misled us in the past. But because none of the mainstream media says this explicitly and the BBC doesn’t even connect the two things at all, then this idea is more likely to be dismissed as “conspiracy theory” than accepted as just plain common sense.

In the background to it’s decision to impose a ‘penalty’ on EDF back in March last year, Ofgem said:

The marketing of gas and electricity to domestic consumers has been a source of concern for Ofgem since the retail market was opened up to competition in 2000. Ofgem has taken repeated enforcement action in this area against a number of suppliers, but any subsequent improvements appear to have been short lived or have had limited impact on the behaviour of other suppliers.

Mmm. That makes you think, doesn’t it? Suppose you got caught trying to rob a bank and only get fined a quid. What are the chances you’d try it again? Pretty high you would have thought. So why wouldn’t that have occurred to anyone in Ofgem or the government?

The Guardian‘s head of environment, Damian Carrington, provided one possible explanation the day after David Miliband’s speech at the Labour party conference in September: Energy firms begin lobbying operation against Miliband price-freeze plan:

Between 2008 and 2011, at least 50 staff from the big six and other companies were seconded into government to work on energy issues and by the end of 2012 almost two dozen were in place in the energy department.

“Companies such as the big six energy firms do not lend their staff to government for nothing – they expect a certain degree of influence, insider knowledge and preferential treatment in return,” said Caroline Lucas, the Green party MP, when the secondments were revealed.

Tom Burke, a former head of Friends of the Earth who worked as special adviser to several Conservative ministers, said: “The secondments are pernicious, but the real power is how they shape the discourse through the media – that is where their many lobbyists do their real work. They constantly feed hard-pressed journalists lines their editors will like.”

If the Big Six were a cartel of dodgy builders, or a family of benefit scroungers, the BBC would have had Big Dom Littlewood chase them down the street with a camera crew asking them why they’ve been cheating their customers.

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