Ofcom UK Fines Shell Energy £1.4m for Broadband Contract Failings

Broadband ISP, phone and energy provider Shell Energy, which is in the process of being sold to the Octopus Energy Group (here), has today been fined £1.4m by Ofcom for “not properly prompting more than 70,000 phone and broadband customers” to review their contract or informing them of the best deals.

The regulator’s End-of-Contract Notifications (ECN) system – as introduced in February 2020 – requires all fixed broadband, mobile, home phone and pay TV providers to issue such notifications to existing subscribers at the end of their term (sent by text, email or letter). The move was intended to help tackle the so-called “loyalty penalty” by keeping customers informed about the best deals and encouraging switching.

In the case of Shell Energy, Ofcom has been investigating them since April 2022 (here), when the provider itself notified the regulator that it “did not send these notifications to some customers for a period of time starting in February 2021“, while other customer letters may not have contained all of the required information.

The regulator’s investigation has today confirmed that “the company broke important consumer protection rules” and, in some cases, “failed” to send out end-of-contract notifications and annual best tariff notifications at all. 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.

Specifically, Ofcom found that 72,837 customers were affected by Shell Energy’s failures between March 2020 and June 2022. Notably, 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, collectively amounting to £398,417.67 – an average of £65.81 each.

Suzanne Cater, Enforcement Director at Ofcom, 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 company is said to have improved their systems, processes and “moved quickly to refund affected customers“, although they decided not to automatically issue refunds lower than £3 to ex-customers (possibly due to the admin costs in confirming and processing them), and in lieu of this, have donated an equivalent amount to charity – this amount includes unclaimed refunds. But Ofcom has required Shell Energy to make refunds available to these customers should they request it.

In terms of the £1.4m fine, which is payable to HM Treasury within four weeks, this penalty includes a 30% discount from the amount Ofcom would otherwise have imposed following Shell Energy’s admission of liability and agreement to enter into their settlement process.

However, in somewhat of a warning to other providers, Ofcom notes that Shell’s fine “would have been significantly higher had Shell Energy not self-reported the contravention, co-operated closely with our investigation and proactively taken steps to remedy the breaches following discovery of the issue.”