Utilities under scrutiny after mis-selling claims

An investigation by the energy regulator into four of the UK’s top utilities after a series of mis-selling claims has led a consumer watchdog to propose a ban on doorstep sales if new guidelines continue to be flouted.

Ofgem launched its probe following complaints that door-to-door and phone-based agents acting for all of the ‘Big Six’ energy companies were providing customers with misleading information and quotes that left them worse off after switching supplier.

But it is currently targeting the investigation only at the worst offenders – npower, Scottish Power, Scottish and Southern Energy and EDF Energy. Scottish Power was reportedly subject to the most complaints, with one out of every 100,000 customers objecting to its practices each year.

Ofgem has the right to fine the supply arms of the utility companies up to 10% of their annual turnover if customer gripes are upheld. The regulator told the Financial Times that it would take "strong action" if it found that suppliers were not complying with their new obligations.

A spokesman said: "We have received information that gives us concern as to whether the four suppliers we are investigating are complying with our tougher sales regulations. However, we are not implying that these companies have broken our rules. Our investigation will seek to establish that."

The watchdog has also set up a hotline for consumers who are concerned about the sales approach adopted by suppliers.

The latest probe comes despite regulations that were introduced in January to clamp down on mis-selling by sales agents, although the problem is nothing new. An Ofgem investigation in 2008 found that 48% of gas customers and 42% of electricity consumers were worse off after switching suppliers on the doorstep.

Figures from watchdog Consumer Focus also indicated that, while the number of complaints had fallen this year, about 200 cases of mis-selling were still being reported each month.

Audrey Gallacher, head of energy at Consumer Focus, told the Guardian: "This is a welcome step by Ofgem to address years of customers getting a bad deal on energy prices on their doorstep. While many doorstep sales people will do a good job, the pay and rewards system continues to encourage mis-selling, despite years of regulation and voluntary initiatives."

As a result, if better advice and enforcement of Ofgem’s new and tougher rules did not end the "flagrant abuse" of this form of selling, the big question will be whether it should be completely banned.