Energy giant Powergen handed record fine

Powergen, the country's second-biggest gas and electricity company, was yesterday fined a record £700,000 for preventing customers from switching supplier.

Powergen, the country's second-biggest gas and electricity company, was yesterday fined a record £700,000 for preventing customers from switching supplier.

Ofgem, the industry regulator, said Powergen's behaviour had been "unacceptable" and followed earlier warnings that such tactics would not be tolerated. "We are serious about clamping down on any actions which damage customer confidence when switching suppliers," Ofgem's chairman, Sir John Mogg, said.

This is the fourth fine imposed for such misbehaviour and the biggest yet. Earlier this year ScottishPower and npower were each fined £200,000 for preventing customers switching supplier and last June British Gas was also fined £200,000 for the same offence.

The Powergen fine followed an Ofgem investigation which discovered more than 20,000 customers had been unfairly stopped from changing to other suppliers over a nine-month period on the grounds that they owed the company money.

However, Ofgem said that the customers were within their rights to leave Powergen.

"This was a clear breach of the special rules relating to customers in debt," Sir John added.

The rules do permit a company to prevent a customer switching supplier but only where debts have been demanded in writing and left unpaid for 28 days. Of the 20,000 customers who were affected, 14,500 have now successfully switched supplier. Those who decided to stay with Powergen received voluntary compensation averaging £20 each - an amount which the consumer body energywatch described as "derisory". Allan Asher, the chief executive of the organisation, welcomed the fine, saying: "The penalty imposed by Ofgem ... gives a strong message to other supply companies that the wilful blocking of consumer choice will not be tolerated."