E.ON ordered to refund customers £12m for mis-selling

The energy group E.ON has been ordered to pay £12m to its customers after an investigation into mis-selling found "extensive poor practices". It is the largest-ever penalty levied by the energy regulator, Ofgem.

More than 333,000 customers who receive the Warm Home Discount Scheme, which is targeted at older people and those on low incomes, will automatically receive a payment of about £35. E.ON said the payments would be made "within a matter of weeks".

But the final bill for E.ON could be up to £20m. The energy company is expected to pay between £3m and £8m in compensation to 465,000 customers who were mis-sold energy between June 2010 and December 2013. These customers are in line for an average payment of £67.

The £12m penalty reflects "E.ON's extensive poor sales practices," Ofgem said. The regulator said it found no evidence that E.ON's senior managers had deliberately mis-sold energy to customers, but they had failed to ensure sales staff were properly trained and followed the rules.

As a result, customers were given incorrect information on the doorstep or over the phone and were not made aware of key terms of the contract before it was signed.

E.ON's chief executive, Tony Cocker, said the failings were "completely unacceptable. We are really sorry and want to make it absolutely clear that we're putting this right." He said the company had ended doorstep selling and cold-calling in their homes in a complete overhaul of sales operations.

Sarah Harrison, Ofgem's senior partner in charge of enforcement, said: "The time is right to draw a line under past supplier bad behaviour and truly rebuild trust so consumers are put at the heart of the energy market. E.ON has today taken a good step by accepting responsibility for its actions and putting proper redress in place."

Ed Davey, the secretary of state for energy and climate change, said: "It's right that if energy companies aren't fair to their customers, then they're penalised – and their customers benefit. That's why we introduced legislation to ensure Ofgem can take tough action in these cases, including making the company pay compensation to the people affected."

Since 2010 Ofgem has imposed nearly £100m in fines and redress on energy companies for breaking the rules, including £39m for mis-selling.

The largest-ever penalty for mis-selling until this ruling was a £10.5m fine for SSE in May 2013. On that occasion, the company's telesales agents were found to have used "misleading scripts" while failing to give accurate estimates and comparisons to customers.

Npower was ordered to pay £3.5m last December for mis-selling, while Scottish Power was fined £8.5m in October for misleading its customers.

The latest fine was seized on by Labour as further evidence of Britain's "broken" energy market. "E.ON is just the latest in a long line of energy companies to be found guilty of misleading the public," said the shadow energy and climate change minister, Jonathan Reynolds.

"The energy giants must know that if they mistreat customers already facing a cost-of-living crisis there will be a very heavy price to pay." The party has promised to freeze energy bills until 2017 and break up the big six energy companies, if it gets into power.

E.ON customers who think they have been mis-sold can call 0800 0568 497 for more information.