Energy giant British Gas has paid out £2.65 million after regulator Ofgem found it overcharged more than 94,000 customers switching provider and wrongly imposing exit fees on thousands of households.
The energy watchdog said Centrica-owned British Gas incorrectly charged 94,211 customers its more expensive standard variable rate tariff after they decided to switch to a new supplier, due to a system error.
These customers were overcharged by £782,450, according to Ofgem.
It also said British Gas wrongly informed 2.5 million customers that exit fees were chargeable during the 49-day switching window and incorrectly charged exit fees totalling £64,968 to 1,698 fixed-deal customers.
Ofgem, which opened its investigation in July last year, said before it had concluded its probe British Gas refunded all customers overcharged by more than £1 and paid out £502,633 in compensation to them.
The provider has also agreed to pay a further £244,770 in compensation to customers wrongly charged exit fees and the standard variable tariff and pay £1.1 million into Ofgem’s consumer redress fund.
Anthony Pygram, director of conduct and enforcement at Ofgem, said: “British Gas failed its customers who were coming to the end of their fixed contracts and switched supplier by unfairly penalising them and applying charges in error.
“Many more customers could have been deterred from getting a better deal due to the incorrect terms and conditions.”
He added: “Our enforcement action against British Gas sends a strong message to all suppliers that they must respect their customers’ rights during the switching window and always treat customers fairly.”
Consumer website MoneySavingExpert.com, whose dossier of evidence had prompted the Ofgem investigation into British Gas and a raft of rivals, welcomed the fine.
Guy Anker, deputy editor at MoneySavingExpert.com, said: “Such behaviour by big suppliers totally undermines the concept of switching by falsely putting people off with the threat of false charges. Then to actually overcharge tens of thousands of people rubs salt into the wound.
“As switching is the key weapon to escape rip-off tariffs and save customers big money, suppliers who wrongly threaten these charges – and sometimes even have the nerve to levy them – are betraying hard-working families trying to save what could be a crucial few hundred pounds a year.
“The regulator’s rules on switching are extremely clear – if you’re in the last 49 days of your fix, you don’t have to pay an exit fee and can switch to a different provider penalty-free.”