E.ON is to hand £7.75 million to Citizens Advice after the energy company was found to have overcharged customers in the wake of price rises.
The package of help for vulnerable customers is in addition to the £400,000 E.ON has already paid back to potentially affected customers.
Regulator Ofgem said the penalty reflected E.ON’s “repeated failing” on billing rules after the company incorrectly imposed exit fees and overcharged customers following price rises in January 2013 and January 2014.
The regulator said E.ON’s errors meant customers who took the chance to switch suppliers after the bill rises were wrongly charged.
Companies are not supposed to apply exit fees if a customer signals their intention to move supplier within the standard 30-day notice period of a price rise. This is the case even if the switch occurs after the price rise.
Sarah Harrison, Ofgem’s senior partner in charge of enforcement, said: “Ofgem’s rules give customers a chance to avoid exit fees and higher costs when suppliers put up prices.
“These are important customer protections and it is vital that suppliers play by the rules so customers are encouraged to engage in the market.”
In November 2012, E.ON paid a £1.7 million package for incorrectly charging exit fees or overcharging customers following price rises.
Ms Harrison said: “It’s absolutely unacceptable that E.ON failed to provide these vital customer protections yet again and this persistent failure is the reason for the high penalty.”
The errors in respect of price rises in January 2013 and January 2014 affected direct debit and standard credit customers. The average amount paid back was around £8 and £12 respectively.
E.ON’s error also resulted in around 500 prepayment customers for the January 2013 price increase and around 6,500 for the January 2014 increase missing out on an average refund of £3.42.
E.ON is tracking down these customers to provide refunds by the end of April.
E.ON said it was committed to ensuring no one would lose out financially as a result of the latest errors.
It said in a statement: “Although the underlying reasons are different, this is not the first time that E.ON has made this error and the company sincerely apologises to those affected.
“E.ON has agreed with Ofgem to carry out an independent external audit relating to the specific breaches and to implement any appropriate recommendations.”
E.ON’s penalty payment will go towards the Energy Best Deal Extra project run by Citizens Advice.
Its chief executive Gillian Guy said: “Ofgem is right to clamp down on this kind of failure. This ruling will send a strong message to the whole industry that consumer rights cannot be ignored.
“It is positive that the Ofgem penalty will go towards helping people who are struggling to heat and light their homes. It is also encouraging that E.ON owned up to the problem and is both providing direct redress and taking steps to make sure this doesn’t happen again.
“Consumers must be confident that the regulator will take strong action when companies fail so this judgment is welcome news.”