In a significant move to rectify billing errors, ten energy suppliers in the UK are set to pay out approximately £7 million in compensation and refunds to over 34,000 customers who were overcharged on their energy bills. This decision comes after a compliance review conducted by the energy regulator, Ofgem, which found that these suppliers had violated regulations concerning the price cap on energy charges.
The issue primarily affected customers with multiple electricity meter points at their properties, who were erroneously charged between January 2019 and September 2024. The suppliers involved in this compensation scheme include major names such as Octopus Energy, Utility Warehouse, EDF Energy, E.ON Next, Ecotricity, OVO Energy, So Energy, Outfox The Market, Rebel Energy, and Tru Energy.
Octopus Energy, the largest supplier in the UK, led the compensation efforts, refunding £2.64 million and providing an additional goodwill payment of £546,278 to over 20,000 of its customers. Utility Warehouse followed closely, returning more than £2 million to 8,272 affected customers. In total, the compensation and goodwill payments across all suppliers amounted to around £7 million.
The overcharging occurred because, while energy suppliers are permitted to apply multiple standing charges for homes with more than one electricity meter, some customers were charged beyond the limits set by Ofgem’s price cap. This led to many being billed more than they should have been when combining standing charges with unit rates.
Charlotte Friel, director of retail pricing and systems at Ofgem, emphasized the regulator's commitment to protecting consumers, stating, "Our duty is to protect energy consumers, and we set the price cap for that very reason so customers don't pay a higher amount for their energy than they should. We expect all suppliers to have robust processes in place so they can bill their customers accurately. While it's clear that on this occasion errors were made, thankfully, the issues were promptly resolved, and customers are being refunded." She also noted that all ten suppliers have updated their systems and processes to prevent similar errors from occurring in the future.
The timing of this announcement is particularly poignant as energy bills remain elevated, with many households grappling with the financial fallout from the 2022 price shock following Russia's invasion of Ukraine. Higher wholesale natural gas prices have kept the price cap elevated, and the latest Ofgem price cap now sets the average annual energy bill at £1,738.
The compensation effort comes amid ongoing scrutiny of energy suppliers' billing practices. Ofgem's review highlighted the necessity for suppliers to adhere strictly to compliance regulations to ensure accurate billing. Friel remarked, "Today's outcome serves as a reminder to all energy suppliers that they must implement the price cap properly and do their due diligence. It also shows that, where appropriate, Ofgem is prepared to work with suppliers that fail to comply with our rules."
For customers who may believe they have been affected but have not yet received a refund, Ofgem has assured that all affected individuals will be refunded automatically. Those who have since changed suppliers will be contacted by their previous supplier to arrange for their refunds.
This incident is not isolated. Earlier this week, Ofgem also ordered Good Energy to pay £150,000 in compensation to former prepayment meter customers due to a failure to issue final bills. Since 2014, Good Energy had neglected to send final bills to customers within the mandated six weeks after they left the company, which is a requirement under energy supplier licenses. Ofgem found that 2,284 customers were affected, with the average compensation amounting to £66 per customer.
The regulator has been active in monitoring energy suppliers and ensuring compliance with price cap regulations, collecting over £400 million in payments through its compliance and enforcement activities since 2020. This money is utilized to assist struggling households with their energy bills.
In light of these recent events, energy experts are urging customers to remain vigilant regarding their energy bills. Ben Gallizzi, an energy expert at Uswitch, commented, "Technical errors like this can occasionally happen, but providers must act quickly to spot when issues arise and make every effort to resolve problems promptly. This overcharging error impacted households with multiple meters. Affected customers will be refunded automatically by their provider, so they shouldn't need to do anything to get their money back. If you have submitted a meter reading recently but think there's an error in your bill, contact your supplier to raise the issue."
As the energy landscape continues to evolve, the focus on accurate billing and consumer protection remains paramount. With energy costs a significant concern for many households, the recent actions taken by Ofgem and the suppliers involved are steps towards restoring trust and accountability in the energy sector.
