James Moore: Ofgem’s SSE penalty looks like small change
Outlook Lest we forget; it's not just the banking industry where bad practice leads to bad outcomes for customers leads to calls to account before regulators.
Yesterday Ofgem brought the hammer down on Scottish & Southern Energy in the form of a £10.5m fine, which is a record for that particular regulator but looks like so much small change when compared with some of the penalties the Financial Services Authority has been doling out of late.
It is true that the £10.5m will not be the end of the matter. Although Ofgem has no powers to demand it, SSE has set aside £5m to compensate those who were the victims of the shiny suited salesmen who turned up on their doorsteps (or appeared on the other end of their telephone lines) claiming to be able to shave pounds off energy bills in exchange for a signature when, in some cases, the reverse was true.
And SSE says it has taken action based on the regulator's findings, although given the nature of what was found, it would have looked very bad had it done nothing. The company has accepted the penalty, shaken up its processes. It has even said its executives will forgo that part of their bonuses linked to corporate performance. For this year. Which, compared with the fine that resulted from events on their watch, looks a bit weak to say the least.
The fact is, we've been here before. One really has to ask, just how much of deterrent are fines on corporate bodies?
After all, this a company which made an adjusted profit of close to £400m in just the first six months of its financial year. Against which, £10.5m represents little more than a pinprick.
Of some value, in terms of how the company conducts itself in future, is the PR damage, inflicted by Ofgem's findings, which is considerable.
However, it's all but certain that we will be here again, if not with SSE then with someone else.
Like banking, the energy industry is one which sells its wares through often complex financial contracts and which has conducted itself on the basis of driving revenues above all else.
The priority for executives has been keeping the City happy at results time, and it is revenues that the City demands. If that means customers lose, so be it.
Executives will only work to ensure that customers don't lose if they, as well as their shareholders, feel pain when they are found to have inflicted undue pain on those customers. Regulators overseeing industries like this really need to fine smarter, not harder.
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