EDF Energy 'incentivised sales team to push for top price tariff

The heat is on energy companies this week as one MP declared: “They don’t grasp the extent of public disgust towards them.”

Those were the words of Tim Yeo, the chairman of the Energy and Climate Change Select Committee, following revelations that nPower hadn’t been paying corporation tax and SSE, formerly known as Scottish and Southern Energy, were fined a record £10.5m for mis-selling gas and electricity.

Now, new information obtained by The Argus suggests that Sussex-based power firm EDF Energy had been encouraging sales staff to sign customers on to the most expensive tariffs, in exchange for the most lucrative commission.

EDF employees have told The Argus how, despite knowing the customers could be getting a better deal on other tariffs, they were told not to mention cheaper deals unless specifically asked for.

In response to our findings, EDF Energy said it would “review commission arrangements”.

Commission payments

Bosses at the firm drew up strict commission payment structures that paid £16 a time if telesales agents signed a dual fuel, direct debit customer onto a “standard” tariff – one of the most expensive deals.

Average energy users in Sussex, who used 3,300kwh of electricity and 20,500kwh of gas per year, could expect an annual bill in excess of £1,271.05 after signing onto the standard variable tariff.

At the other end of the scale, an average customer could expect to pay £1,132.11 if they signed up to the Fixed S@ver v2 tariff – saving them £138 per year compared to the standard tariff.

But EDF staff said they were paid just £4 for registering dual fuel, direct debit customers onto the Fixed S@ver v2 tariff – the cheapest available tariff at the time which also guaranteed no price increases until late last year.

This meant none of the hundreds of telesales staff at the Worthing, Hove and Sunderland offices were encouraged to look out for the customer’s financial interests and instead focused on boosting their pay packets with high rates of commission.

Expensive tariffs

However, an EDF spokesman has told The Argus that any employee who was not selling products in the interests of customers would face disciplinary action.

The previous practice stopped in June last year after “management realised it wasn’t right”, according to an employee, but customers are still being affected today as they potentially remain on the tariffs they initially signed up to.

In addition, top-performers were, and still are, rewarded with prizes including holidays, televisions, hospitality boxes at football matches and concerts and cash in their salary – all funded by the company’s reported annual incentive budget worth hundreds of thousands of pounds.

Lucia McMannus, 50, from Worthing, was an EDF Energy customer before being lured away by British Gas in 2011. She went back to EDF after receiving a phone call from their sales team.

Cheaper option

She said: “They told me the tariff would be cheaper than the rates I was on with British Gas and when they read the prices out, they were.

“But what they didn’t tell me was that they had even cheaper tariffs available for me that I could have gone on to. I also discovered I wasn’t on the eco:20:20 tariff that I had initially signed up to with them.

“I realised this after about six weeks when I got a bill for £300 on the gas and £400 for electricity. If I hadn’t found out I was on their most basic rate my bills for the year would have been far too much.

“I don’t understand why companies don’t just give you the best deal possible. Why should people have to work hard and dig deep to be given a fair service?”

'Disappointing news'

Mike Weatherley, MP for Hove, said EDF’s practices were “unacceptable” and called for the firm to “at least recognise they made a mistake”.

He said: “This is very disappointing news but it isn’t surprising. Tim Yeo’s comments are reflective of what my constituents tell me on a weekly basis.

“Energy companies are in a very privileged position and they have a duty to make sure the consumers are made aware of what is best for them and what is available.

“Frankly, what’s been going on in the industry recently has been unacceptable and the companies need to really focus on gaining the trust of the British public. Practices like this don’t help that.

Compensation gesture

“If something isn’t done industry-wide then I will be the first in the queue to back David Cameron and support any legislation that protects consumers, especially the vulnerable.

“I’m a great believer in free market economies but in this case the industry really does need to sort itself out.

“I’m glad EDF Energy has since changed its practices, but it would be a good gesture from the company to make some sort of compensation attempt to customers who signed up during the period of distorted selling.

“At the least, they should recognise they made a mistake and give confidence back to its consumers.”

'Cold-blooded profiteering'

Consumer groups have blasted the Big Six energy suppliers of “cold-blooded profiteering” after official figures showed they had more than doubled their retail profit margins over the past 18 months.

French-owned EDF prompted outrage in February after boasting operating profits of almost £1.6 billion – a rise of 8.5 percent on the previous year – and equivalent of £427 for each of the 3.7million British households it supplies.

It’s also in the process of demanding subsidies from the Government to build nuclear power plants across the country.

Caroline Lucas, Green MP for Brighton Pavilion, said the news on EDF’s previous commission structure was “scandalous”.

'Scandalous'

She said: “It’s shocking and not acceptable.

“We live in a time where we have more people living in poverty than ever before and cases like this are scandalous.

“The market needs a shake up. There needs to be more players involved apart from the normal ‘Big Six’ monopoly.

“My constituents are constantly telling me how they are struggling with bills and how it’s difficult and complicated to switch. Why?

“If Mike Weatherley is at the front of the queue to push for legislation, he’ll find me there too. I’m equally as committed to it.”

Cutting prices

EDF was the first of the Big Six suppliers to cut its energy prices in January this year after slashing gas by five percent.

But the cut followed two price rises last year, the latest being a 4.5 percent electricity increase and 15.4 per cent gas increase in November.

Critics have condemned energy companies for being too hasty to increase rates when wholesale prices rise and acting slowly to reduce prices when the market dips.

Power chiefs say this is because they buy energy up to a year in advance and that’s why their prices aren’t always reflective of the wholesale prices.

It was Margaret Thatcher who sold off the UK’s energy sector to private firms in 1990. Her death last week and the subsequent celebrations were a sure sign that some people are still reeling at the decision to create an “open” market.

'Disgraceful'

Sam Robertson, a campaigner with the Fuel Poverty Action group, said EDF Energy was “disgraceful” but said the problem ran deeper than sales policy.

He said: “EDF’s previous practice of incentivising their salespeople to push more expensive tariffs is disgraceful.

“Energy should not be something sold to us at our doorstep at sky-high prices. It should be a public good, under community control, produced for our benefit, not to line the pockets of energy company tycoons.

A rapid shift to community controlled renewable energy would bring down bills and tackle climate change while shifting power from the Big Six and putting it back in people's hands.”

Ofgem checks

Energy regulator Ofgem said it required suppliers to carry out any marketing activities in a fair, transparent, appropriate and professional manner and requested The Argus send over evidence of distasteful sales practices.

A spokesman added: “Ofgem takes strong action where companies are found to have fallen short of the standards expected of them and since April 2010 Ofgem’s enforcement action has seen 14 full-scale investigations completed, over £35million in penalties and around £6million in consumer redress.

“In addition, Ofgem is currently consulting on imposing a penalty of £10.5 million on SSE for misselling to consumers.

“Moreover, Ofgem is making important changes to the energy market to make it simpler, clearer and fairer for consumers.

“This includes making suppliers tell consumers via their bills which of their deals is the cheapest so there can be no room for doubt.”

Changed tactic

Today, EDF has one of the cheapest energy deals on the market. The firm’s Blue Plus Price Promise February 2015 tariff guarantees fixed energy prices until February 28, 2015.

In contrast to its previous sales activity, the company also promises to notify customers if there is another tariff or supplier that’s cheaper.

A spokeswoman from the company said: “We have controls in place to ensure our employees only promote products that are right for customers. This includes coaching and quality checks on sales.

“If there was ever a case where our employees were not selling products in the interests of customers, disciplinary action would be taken that could end in dismissal. This is made clear to all sales staff.

“Employees who answer calls from customers only get a very small part of their pay in commission – a maximum of two per cent.

“However, in light of concerns raised, EDF Energy has decided to review these commission arrangements.”

Ruth Palmer, 23, from Brighton
“I lived in a flat share and had a bill come in from EDF which was high compared to what we normally paid.

“It is ridiculous that they haven’t been offering better rates.

“I get that they have sales targets but I don’t understand why EDF would try and sell their worst products to customers.

“Surely they would want to sell something that is to the best of their capabilities?”

David Ingledew, 61
“I’m actually in the process of talking to an energy broker as my renewal is up in June and at this moment in time I am very confused.

“The broker is adamant he can get me a better deal.  My whole EDF account actually rolled over last year before I could even think about changing it.

“I find it very frustrating that I worry about how much I will have to pay all the time.

“The fact they don’t offer better deals unless you ask for them is ridiculous. It shouldn’t happen.”

Daniel Mulvay, 47, from Brighton
“I wrote to EDF Energy last year because they were charging me £1,700 per quarter for gas and electricity. They sent round a bloke to look into the problem but he said there is nothing wrong with the amount I was paying. I live in a bungalow so didn’t think I should be paying that much.

“Eventually they switched me to an electricity prepayment key and stopped bills all-together.

“But I wonder why they didn’t offer me any cheaper tariffs when I called up? I was just on the standard prices.

“They are just trying to make money for themselves. It’s all wrong.”

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