Eon made to pay £7.75m penalty for overcharging UK customers

Ofgem, the energy industry regulator, has imposed a £7.75m penalty on Eon after the utility repeatedly incorrectly charged exit fees and overcharged customers following price rises.

The payment, which will be given to Citizens Advice, is the fourth highest Ofgem has imposed for a consumer-related offence and is in addition to £400,000 Eon has already paid to potentially affected customers.

Under Ofgem rules, suppliers have to give customers 30 days' notice of a price rise that allows people a chance to switch before any increase takes effect. Exit fees or the higher charge should not be levied if customers signal their intention to switch, even if they do not move before the price rise is implemented.

Eon's errors relate to price rises in January 2013 and January 2014. It has paid back an average of £8 and £12 in relation to the offences respectively to about 40,000 customers even though Ofgem accepts the number of affected people was likely to be significantly less.

It is not the first such penalty for Eon. Last July it was made to pay £12m for violating rules regarding telephone and face-to-face sales activities.

Eon said that it "sincerely apologises to those affected", adding it had agreed to "carry out an independent external audit relating to the specific breaches and to implement any appropriate recommendations".

Sarah Harrison, Ofgem's senior partner in charge of enforcement, said it was "vital that suppliers play by the rules so customers are encouraged to engage in the market".

"It is important that Eon has repaid potentially affected customers and co-operated with the investigation," she said. "However it's absolutely unacceptable that Eon failed to provide these vital customer protections yet again and this persistent failure is the reason for the high penalty."

Ofgem has the power to impose fines, which are paid to the government, and secure redress payments, such as in Eon's case, which are paid to groups that benefit consumers.

The largest penalty Ofgem has imposed was a £5m fine and £23m redress payment imposed on Drax last month for failing to meet its carbon emissions reduction obligations.

Since 2010, it has imposed about £150m in fines and redress on energy companies for rule breaches.

© The Financial Times Limited 2015. All rights reserved.
FT and Financial Times are trademarks of the Financial Times Ltd.
Not to be redistributed, copied or modified in any way.
Euro2day.gr is solely responsible for providing this translation and the Financial Times Limited does not accept any liability for the accuracy or quality of the translation