Shell’s B2B arm hit with seven-figure fine for overcharging

Ofgem has issued a £1.6 million fine to Shell’s B2B energy arm for “serious overcharging of business customers”.

The regulator found that Shell-owned Hudson Energy Supply UK (HES) breached 10 licence conditions by outsourcing elements of its day-to-day customer operations without appropriate supervision.

Issues found included “serious unjustified overcharging” of customers, as well as failure to return credit refunds owed.

HES was acquired by Shell in 2019 for £10.5 million before being rebranded as Shell Energy UK in 2020. Licence breaches relate to the five year period before the acquisition.

On average customers were overcharged by more than £1,800, with one customer overcharged by around £22,500. While most of the money owed to customers has now been returned, the regulator said that some customers did not receive their money back for up to seven months after it was taken from them.

Ofgem said these breaches resulted in “serious customer harm”.

Cathryn Scott, director of enforcement and emerging issues at Ofgem, said: “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. 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.”

HES was also found to have breached conditions relating to the provision of important information at the time of contract renewal, leaving many microbusiness customers (MBCs) without the required information to make informed switching choices and take advantage of other deals available.

Ofgem’s investigation also uncovered issues relating to the handling of credit balances on former customers’ accounts, whereby credits owing to customers were not returned promptly or at all. Closed account credit balances owed to customers totalling £365,000 were amassed.

In response to the case, HES has 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
• 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.

This latest fine comes just weeks after Shell’s retail arm, Shell Energy Retail, received a £1.4 million penalty from Ofcom for a “serious breach” in consumer protection rules. In particular, Ofcom said it had fined Shell Energy for failing to inform more than 70,000 customers to review their contract, or giving them inadequate advice on how to get a better deal in future.

In October, Ofgem also announced that it planned to claw back more than £24 million from Shell Energy Retail as part of the true-up process for Last Resort Supply Payment claims.

In September, Shell struck a deal to sell the retail business to Octopus and that agreement is awaiting regulatory approval.