SSE plc can confirm that it will be accepting the £10.5m penalty announced by Ofgem today in relation to breaches of two Standard Licence Conditions for domestic energy sales in Great Britain, mainly between October 2009 and July 2011.
SSE is deeply regretful that breaches occurred and apologises unreservedly to any customers who have been affected by sales activity which ran counter to the values and culture of the company. It has taken important lessons on board and has transformed its approach to sales to ensure that it will not fall short of the standards all of its customers deserve.
This marks the conclusion of Ofgem's investigation and associated enforcement action, financial or otherwise, against SSE in relation to these breaches. Ofgem has also confirmed that no final order is required in order to achieve compliance.
Summary of breaches of two Standard Licence Conditions
Ofgem is levying the fine on SSE as penalty for breaches and partial breaches of two Standard Licence Conditions:
- SLC 23.1 - Notification of Domestic Supply Contract Terms; and
- SLC 25 - Marketing Gas/Electricity to Domestic Customers.
The breaches relate mainly to inadequate monitoring, auditing and execution of SSE's past sales activities. SSE believes it worked hard and in good faith to implement changes to licence conditions made by Ofgem in 2009 and 2010 designed to ensure sales were conducted in a fairer and more transparent manner. Nevertheless, it accepts unreservedly that it did not move fast or far enough in some areas and acknowledges readily that some of its processes were not as effective as they should have been.
A large number of the breaches refer to activity undertaken between October 2009 and July 2011 - the point at which SSE suspended its doorstep sales operations in Great Britain; others relate to telesales and other sales activity conducted by SSE.
Action taken to ensure sales processes are compliant
While the investigation was being undertaken, SSE took significant action to begin remedying the substantive issues raised, and considers its sales processes to be compliant. SSE has also taken decisive steps to ensure that this will not happen again. These include:
- becoming the first company to suspend doorstep sales in Great Britain when it did so in July 2011;
- a significant restructuring - including the creation of a new Retail division and the external recruitment of both a new Director of Sales and a new Managing Director, Retail;
- bringing domestic telesales in-house;
- new training programmes being delivered to staff involved in energy sales;
- Ongoing roll-out of a new post-sales verification process, in which customers are transferred at the point of sale to an independent team who check the sale has been carried out in the right way; and
- enhanced post-sales quality checks, in which recorded calls are assessed and checked against specific requirements of licence conditions.
The management of SSE has always sought to ensure high standards of compliance across the business and, as a result of its review of energy sales, took action to reinforce compliance within, and of, the Retail business.
Introduction of an enduring Sales Guarantee
To provide redress for customers affected, SSE introduced in December 2011 its Sales Guarantee - setting aside up to £5 million to ensure that any household customer who shows that they switched their energy supply to SSE after being given inaccurate information or being misled will have any resulting financial loss made good. The processes underpinning the Sales Guarantee have been independently reviewed and audited to make sure that they are fair and reasonable.
Since early 2012, SSE has sent more than 970,000 letters to existing customers - including all of its customers who it signed up through the doorstep sales channel after October 2009, when Ofgem placed the new obligations on suppliers - alerting them to the Sales Guarantee and how to establish whether it might affect them. SSE has also written to customers gained via third-parties and through telesales channels who may have been affected. The letter featured the large, bold heading, Our Sales Guarantee - Please do not ignore this letter, it contains important information.
As a result of this, SSE has so far paid out to several thousand customers, with payments totalling more than £400,000. SSE continues to encourage any customer who believes they may have been affected to make contact as soon as possible so that it can make good any resulting financial loss.*
The safeguard offered by the Sales Guarantee will continue to apply to any sale made by SSE in the future. The Sales Guarantee, the only one of its kind in the industry, is a voluntary redress scheme made available by SSE to ensure a fair outcome for its customers. It is independent from the penalty proposed by Ofgem in today's announcement.
Executive Directors' remuneration
The Board of SSE plc was advised of Ofgem's formal statement of case against SSE in 2011. It took the issues raised by the case very seriously and as a result the company's three Executive Directors received no payment in 2012 in respect of the corporate performance criterion of the company's Annual Incentive Scheme.
William Morris, Managing Director, Retail, said:
"It has been clear to me from my first day at the company that everyone at SSE is deeply regretful of the way in which we failed to manage and monitor some sales activities, particularly between 2009 and 2011, when, unacceptably, standards slipped below the high levels all customers should be able to expect. During the period in question we worked hard to offer competitive prices and carve out an industry-leading position on customer service. We did not, however, spend enough time monitoring our sales processes. That meant we did not always sell in the right way, and we let some customers down.
"When I joined SSE, it was clear that efforts to put things right were well under way. Existing and potential customers can rest assured that we now have the systems, procedures, staff, training and auditing in place to ensure that they will not be let down again."
*SSE believes that all customers who may have been financially disadvantaged as a result of the breaches should have received a letter alerting them to the Sales Guarantee; nevertheless, our dedicated team can be contacted on 0800 975 3341.
For footage of Will Morris, Managing Director, Retail, talking about today's announcement: http://youtu.be/4fWKnVe57nI
For Chief Executive Ian Marchant's blog about today's announcement: /listing/2013/04/blog-on-behalf-of-the-whole-of-sse,-sorry/
For information regarding SSE's Sales Guarantee: http://www.sse.com/PressReleases2011/ImplementationSalesGuarantee/
For information regarding SSE's suspension of Doorstep Sales: http://www.sse.com/News/PressReleases/2011/DoorstepSales/