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Shell Retail Energy Arm Slapped with Second Fine for ‘Serious Overcharging’

A company owned by oil and gas giant Shell has been slapped with a fine by the energy regulator Ofgem, weeks after the communications regulator also fined part of the customer-facing part of the group.

Hudson Energy Supply (HES), a non-domestic market energy supplier which Shell purchased in 2019 as part of its efforts to take on the UK retail energy supply market, must cough up £1.6m after the regulator found it "failed its customers by failing to comply with a number of important licence conditions."

An investigation by Ofgem opened in July 2020, found a number of breaches, including outsourcing services without supervision, leading to poor provision, and a "serious unjustified overcharging of customers, in one case of £22,500."

The probe found that on average customers were overcharged by more than £1,800, with some not receiving their money back for seven months.

Shell paid £10.5m for Hudson Energy Supply UK in October 2019.

"As part of our role as the energy regulator, we expect suppliers to comply with their obligations, including where they choose to outsource elements of their business," said Cathryn Scott, director of enforcement and emerging issues at Ofgem.

"In this case a series of failings by HES has resulted in unacceptable outcomes for energy customers, with a number being unjustifiably overcharged by significant amounts, resulting in serious customer harm. 

"Through taking this action Ofgem is sending a firm signal to the market that it is not possible to outsource compliance with the licence conditions: the licence holder is responsible for any breaches and any harm caused to its customers. 

"This significant penalty should send a strong signal to all suppliers in the market to act with the utmost care and integrity when it comes to engaging and monitoring third parties carrying out important areas of their supply business on their behalf. This is a difficult time for all customers, and poor service and deliberate overcharging will simply not be tolerated." 

This comes after Shell Energy received a £1.4m fine from the communications watchdog Ofcom for a "serious breach" in consumer protection rules.

Ofcom said it had fined Shell Energy for not prompting more than 70,000 customers over a two-year period to review their contract, or giving them inadequate advice on how to get a better deal in future.

A Shell spokesperson said Ofgem's findings came "following a two-year investigation related to a historic commercial arrangement between Hudson Energy Supply Ltd. and a third-party engaged to carry out a number of customer facing activities, including acquisition of customers, billing and customer service."

It said Shell had now "admitted to all of these breaches, with Shell, who took over the ownership of HES in 2019, having taken appropriate remedial actions to ensure that these failures are not repeated in its business."

It also said the company "agreed to settle the case with Ofgem, via a penalty of £1,668,426, to be paid into Ofgem's Voluntary Redress Fund, which supports energy consumers in vulnerable situations, and invests in innovation and carbon emission reducing projects."

Shell insisted the actions leading to the penalties took place before it bought HES.

By CityAM

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