British Gas pays out £2.65 million for overcharging customers

29 August 2018

British Gas has paid out £2.65 million in compensation after overcharging more than 94,000 customers who switched to new suppliers.

Regulator Ofgem says British Gas charged 94,211 customers the more expensive standard variable rate tariff after they switched to a new supplier as a result of a system error.

According to Ofgem, these customers were collectively overcharged by £782,450.

British Gas also wrongly informed 2.5 million customers that they would incur exit fees 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 2017, says British Gas refunded in full all customers who had been overcharged by more than £1 and paid £502,633 in compensation to them.

British Gas has agreed to pay a further £244,770 in compensation to customers who were wrongly charged exit fees, alongside those who were put on the more expensive standard variable tariff. The company will also pay £1.1 million into Ofgem’s consumer redress fund.

Anthony Pygram, director of conduct and enforcement at Ofgem, says: “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.”

Mr Pygram says this is particularly frustrating, given that Ofgem put the switching window in place to help all customers to switch before they are rolled onto their supplier’s expensive default rate.

He adds: “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.”

British Gas has now corrected its terms and conditions for customers to make it clear they will not be charged exit fees during the switching window and changed its procedure for producing this information.

A Centrica (British Gas's parent company) spokesperson says: “A system error led to a small proportion of customers being incorrectly charged. We’ve apologised to the customers affected. Those who were charged too much were promptly refunded as soon as we identified the issue and were paid an additional goodwill gesture. Some customers were provided with initial communications containing incorrect terms and conditions – but all other communications they received were correct.

“We note Ofgem has acknowledged that we have already addressed this issue and that we have changed our processes to ensure the error has been corrected.”

Right to switch

According to energy switching rules, anyone on a fixed-term tariff has a right to switch to a new deal without paying exit fees when there are 49 or less days before the fixed-term ends.

Richard Neudegg, head of regulation at uSwitch, says: “British Gas has been rightly reprimanded for undermining consumers’ trust in the energy market.

“Energy customers expect suppliers to get the basics right, like knowing when they shouldn’t charge exit fees.

“Ofgem’s action in forcing British Gas to rectify its procedures is vital - households who are being hit by a barrage of price rises this year need the reassurance that they have an escape route by switching supplier.”

Price hikes this year

A growing number of households are switching away from the Big Six in favour of smaller alternatives as a result of price hikes.

Earlier this month, British Gas announced its second price rise this year, which will take the typical standard tariff bill to £1,205 a year.

E.on, SSE, Npower, EDF, Scottish Power and Bulb have also introduced price rises this year.

Peter Earl, head of energy at Compare the Market, says: “This shoddy behaviour, coupled with better deals elsewhere, is precisely why so many people are leaving the Big Six in droves. Sadly, it seems that many people just paid the wrongly imposed fees without even knowing.

“This is largely down to the fact that the energy market is too confusing. There are still too few people actively engaged in their energy use and bills, and therefore too many people are stuck on very uncompetitive variable tariffs. To then wrongly penalise customers for switching, is a real kick in the teeth.” 

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