Ofcom has fined Shell Energy £1.4 million for breaking important consumer protection rules concerning their phone and broadband customers.

The UK consumer watchdog found that the energy company did not properly tell over 7,000 customers to review their contract, or let them know what they could save by signing up to a new deal.

The specific rules that were breached, introduced by Ofcom in 2020, require providers to proactively prompt their customers before their existing broadband or phone contract is up.

“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,” Suzanne Cater, enforcement director at Ofcom said.

72,837 customers were found to be affected by Shell Energy’s failures between March 2022 and June 2022 – in some instances, the company failed to send end-of-contract notifications and annual best tariff notifications at all.

In other cases, the notifications included inaccurate or incomplete information, caused by a combination of manual errors and system and process failures on behalf of Shell Energy.

Notably, 7,750 customers received an end-of-contract notification that contained incorrect price information on their minimum term period ending.

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.

“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,” Cater added.

According to Ofcom’s new 2020 rules, providers must provide information to help customers shop around and take advantage of a better deal, as well as remind their customers if they are already outside of their minimum contract period.

More specifically, telecoms and pay-tv companies must issue an ‘end-of-contract’ notification to customers – by text, email, or letter – between ten and forty days before their minimum contract period comes to an end.

Further, companies must send notifications at least annually to customers who are already outside of their minimum contract period, reminding them that they are free to leave or change their current deal. Both notifications must also include information on the best tariff available so customers are more informed on how they can save.

As a result of Shell Energy’s failings to do so, Ofcom has imposed the £1.4m fine, payable to HM Treasury within four weeks. The penalty includes a 30% discount from the amount Ofcom would have otherwise imposed following Shell Energy’s admission of liability and agreement to enter into Ofcom’s settlement process.

Ofcom has stated that the fine would have been higher if Shell Energy had not self-reported the contravention, co-operated with the investigation, and proactively taken steps to remedy the breaches following discovery of the issue.

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The regulator has also said Shell Energy has since made a number of changes to its systems and processes to help prevent future recurrence, as well as refunded customers.

“Shell Energy Broadband has found itself under a significant amount of scrutiny from Ofcom ever since it rebranded from First Utility Broadband in 2019. According to Ofcom’s latest broadband customer service report, Shell generated the most customer complaints of any major British broadband provider,” Tom Paton, founder of Broadband Savvy, a broadband advice service, said.

“It’s not just that Shell failed to send out end-of-contract notifications. Ofcom found that the company sometimes provided incorrect information to customers, potentially leading people to renew their contract when they did not need to.

“We think that Ofcom’s punishment is more than fair, and that they could potentially have gone further with an even larger fine, to make it clear to large ISPs that these rules are not to be broken.”