Small business energy supplier BES has been hit with a penalty just shy of £1 million by energy watchdog Ofgem.
The regulator’s investigation found the supplier was treating customers unfairly by not telling them about important contract details.
As most of its customers were on multiyear contracts, BES’ failure to explain possible termination fees to customers if they ended their contract early, to properly explain price reviews during their contract, and that they faced increased standing charges for not using a minimum amount of energy were particularly serious, said Ofgem.
Some customers on deemed contracts were also blocked from switching supplier, so ended up paying over the odds for their energy.
BES will now compensate those affected. Make good measures include repaying termination fees as well as standing charges.
BES will also get in touch with customers who have previously contacted them about their contracts and will allow them the option to end their contracts without paying termination fees.
Of the £980,000 BES has agreed to pay, £310,000 will be returned to customers, with the remainder going to the Business Debtline.
Ofgem said BES had cooperated with its investigation and since improved its processes.
“BES failed to treat its customers fairly and did not provide them with key information when signing up for contracts,” said Ofgem’s head of enforcement Anthony Pygram.
“BES’ customers were unable to make fully informed choices about their energy supply and many were signed up to four or five year contracts without realistic ways to exit. This was unacceptable, and is why the supplier has agreed to pay £980,000 to compensate customers directly affected and to benefit consumers through Business Debtline.”
Ofgem pointed out that around 10% of micro businesses are on deemed contracts, taken up when firms move into new premises and start using energy without agreeing a contract. The regulator said that on average, those on deemed contracts paid 80% more than rates charged in a negotiated contract.
In a statement, BES said the issues had now been rectified.
Joel Chapman, Head of Regulation & Compliance at BES said: “BES takes customer service and compliance extremely seriously and we apologise sincerely to the customers affected by these issues.
“We have engaged openly with Ofgem, both in the years prior to and throughout the course of this investigation, and we are pleased that the regulator agrees that we have improved our processes.
“Over the last 18 months we have invested heavily in additional staff, processes and IT systems to ensure we not only remain compliant, but deliver a first class level of service.
“This is the first and only investigation by the regulator in BES’s 10-year history and we have learned a number of vital lessons, which will allow us to continue working with Ofgem in an open and transparent manner in the future, while also ensuring that treating customers fairly remains central to our business.
“BES has agreed to repay more than £310,000 to customers directly affected by these problems and will also be paying £670,000 to support Business Debtline’s vital work with small businesses facing financial difficulty.”