Shell Energy has been fined £1.4m for failing to alert more than 70,000 phone and broadband customers to the end of their contracts or tell them what they could save by signing up to a new deal.
The communications regulator, Ofcom, found that Shell’s UK consumer gas, electricity and broadband business broke consumer protection rules designed to ensure that customers get a fair deal.
These rules, introduced by Ofcom in 2020, require providers to proactively prompt their customers before their existing contract is up and provide information to help them shop around and find a better deal.
Telecoms and pay-TV companies must issue an “end-of-contract” notification to customers – by text, email or letter – between 10 and 40 days before their minimum contract period comes to an end. They must also send notifications at least once a year to customers who are outside their minimum contract period, reminding them that they are free to leave or switch to a different deal. Both notifications must include “best tariff” information.
The regulator’s investigation found that Shell broke its rules by failing to send the required end-of-contract alerts and annual best tariff notifications to some of its customers.
It found that 72,837 customers were affected by Shell’s failures between March 2020 and June 2022. In some instances, the company failed to send out end-of-contract notifications and annual best tariff notifications altogether. In other cases, customers were issued with notifications that included inaccurate or incomplete information. This was caused by a combination of manual errors, and systems and process failures at Shell Energy.
About 7,750 customers received an end-of-contract notification that contained incorrect information about the price they would pay once their minimum term period came to an end. Of these customers, 6,054 went on to pay higher charges than they were originally quoted, a total of £398,417.67 – an average of £65.81 each.
The Ofcom enforcement director, Suzanne Cater, said: “Every day tens of thousands of customers come to the end of their phone or broadband contract and can make significant savings by switching provider or signing up to a better deal. That’s why our rules, which demand that providers prompt customers with the information they need to take action, are so important.
“Shell Energy’s failings represent a serious breach of our consumer protection rules and they must now pay the price. This sends a message to the whole industry that we won’t hesitate to step in on behalf of customers if they don’t play by the book.”
The fine imposed on Shell is payable to HM Treasury within four weeks. It is 30% lower than it would normally have been after the company admitted liability and agreed to enter into Ofcom’s settlement process.
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Shell reported the breach of rules itself, cooperated closely with the investigation and made changes to its systems and processes to help prevent the problem happening again.
The company moved quickly to refund affected customers and this is now complete. Shell Energy decided not to issue refunds lower than £3 to former customers, and instead donated an equivalent amount to charity, which also includes unclaimed refunds. Ofcom has required Shell to make refunds available to these customers should they request it.
Last year, Shell’s consumer arm was fined £536,000 by Ofgem for overcharging thousands of customers on prepayment meters since the energy price cap was introduced in 2019.
