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UtILIty WEEK | 23rd - 29th May 2014 | 27 Customers Market view P icture the scene: it is June 2010 and you know you have "significant issues" around mis-selling by your contracted agency staff who sell domestic energy. Fast forward to June 2012 and you find out that for the past two years your in-house sales department is plagued with problems too. Only 0.1 per cent of your telesales calls are being monitored, doorstep selling has continued for a year aer your competitors ended the practice, employees can bypass monitoring processes, training standards are short of what the regulator has asked for, and sales staff are able to manipulate data to incorrectly show consumers they would be better off switching to you. What would you do? Arguably more than Eon did. When it found itself in this position it launched its "Reset Review", putting con- sumers "at the very heart" of the business. But the mis-selling continued for a further 14 months, as laid bare in a damning report released by Ofgem this week, as it slapped Eon with a record £12 million redress bill for mis-selling. Ofgem's report says "misleading quotes" were being given to potential customers as sales workers misused their tablet comput- ers to wrongly show the benefits of switch- ing to Eon. This was identified in June 2012, yet staff continued providing "misleading quotes and comparisons". Further issues with the tablet system let Eon representatives manipulate data to show a "significant saving" when the reality was different. Again, this continued until the end of last year, and Ofgem is clear that the fault lies partly with Eon managers' failure to ade- quately audit the process. There was a "live audit" system in place from August 2011, which should have policed the system. However, sales agents had the abil- ity to bypass the live audit, and Eon's own information showed "the vast major- ity" were doing just that. Ofgem said this allowed agents to give "false and mis- leading information to consumers without being detected". Of those that were subjected to a live audit, "a significant number" showed com- pliance issues. The auditing shortfall encompassed tel- esales too. Until June 2012, only 12 calls per quarter were audited for each sales agency. This gradually increased to 30 audits per agency per quarter by the second half of 2013. Ofgem slammed this as "insufficient for Eon's management to identify all problems with outsourced telesales". Things improved aer a "sales improve- ment plan" was introduced, but not enough to satisfy Ofgem. This was partly because Eon required only an 85 per cent compliance rate from its agencies. Ofgem deemed the 15 per cent failure margin "unacceptable". It was only in December 2013 that Eon terminated its agency deals, bringing sales back in house. Unfortunately for the energy suppli- ers, not only was it not auditing outsourced calls, it was not recording in-house telesales calls either, until February 2013. Staff "were aware they were not being monitored and this increased the likelihood of energy being sold in a non-compliant way", concluded the regulator. Ofgem's analysis of those calls that were recorded found that "in the majority of cases", customers were mis-sold because tar- iff information was not provided. Eon's auditing process also proved inad- equate, because between June 2010 and August 2011, only 0.1 per cent of all sales were audited, so poor practice and mis-sell- ing were less likely to be detected. Ofgem concluded that poor information from sales staff enticed customers to switch, while "poor management practices" to cor- rect the failings "potentially lengthened" the period during which consumers were mis-sold to. These failings came despite numerous opportunities for Eon to improve its sales practices. In 2009, Ofgem launched its mar- ket probe, at which time suppliers were con- sulted on licence changes. In May 2010, the regulator changed the sales rules, yet Eon did not update its train- ing materials until August that year, and January 2011 for staff using the tablet system. Eon was aware in June 2010 of problems with its agency sales staff, and took "insuf- ficient action". Ofgem notified Eon of its con- cerns again in October 2012. Tony Cocker, chief executive of Eon UK, has seen his 2013 bonus docked by 25 per cent – though that still leaves £520,000, on top of his salary of £945,286 for the year. He apologised to customers, promised to put things right, and acknowledged that Eon's actions were "completely unaccepta- ble". He has promised a complete overhaul of the sales operation. Cocker said: "We can now start to make amends." However, lasting damage has been done to the industry. Five of the big six have now been found guilty of mis-selling, incurring total fines of £39 million. Only British Gas has escaped unscathed. Tom Lyon, energy expert at Uswitch.com said: "Trust in the industry is already at an all-time low and this fine will only serve to further increase consumers' cynicism." With the investigations by Ofgem into mis-selling now complete, everyone will be hoping that, as Sarah Harrison, senior part- ner in charge of enforcement at Ofgem, said the Eon verdict will "draw a line under past supplier bad behaviour". Mis-selling engulfs Eon Eon has become the fifth of the big six to have been found guilty of mis-selling, and has been hit with a record £12m bill for its trouble. Mathew Beech looks at what went wrong. Ofgem's fines and redress fOr mis-selling date Company fine redress May 2012 EDF Energy £1 £4.5m May 2013 SSE £10,500,000 £0.0m December 2013 Scottish Power £1 £8.5m February 2014 Npower £1 £3.5m May 2014 Eon £1 £12m