British Gas has agreed to pay £20 million into Ofgem's voluntary redress fund to settle an investigation into the forced installation of prepayment meters on vulnerable customers.
The energy regulator's probe covered activity between February 2018 and February 2023, a period during which customers had prepayment meters installed under warrant without adequate safeguards.
Centrica PLC (LSE:CNA), the FTSE 100 owner of British Gas, said the matter had been resolved through "alternative action" with Ofgem, avoiding a formal enforcement ruling.
In addition to the £20 million payment, British Gas will write off up to £70 million in energy debt owed by vulnerable customers and carry out a comprehensive review of customer records from the period to identify those entitled to further compensation.
Customers affected between 2018 and 2021 will now receive redress for the first time, extending beyond the compensation already paid to those affected in 2022 and 2023.
British Gas said customers do not need to take any action and will be contacted directly where applicable.
The prepayment meter scandal erupted in early 2023 when it emerged that debt collectors acting on behalf of British Gas had been forcing their way into homes to install the meters, sometimes leaving vulnerable people, including elderly and disabled customers, unable to heat their homes.
Chris O'Shea, Centrica's chief executive, said: "What happened should never have happened, and I am sorry to the prepayment customers who were affected."
British Gas immediately paused warrant-based installations when the issues surfaced and ended its use of third-party contractors for field debt recovery, steps Ofgem acknowledged in its decision.
The company has not restarted warrant-based prepayment meter installations.
British Gas will now establish a vulnerable energy customers debt advisory panel, including independent experts, to run for 24 months with the aim of developing what it called industry-leading practices for the treatment of customers in debt.
The announcement comes as household energy debt across the sector is projected to climb to around £7 billion later this year, according to industry body Energy UK.
Since the 2022 energy crisis, British Gas said it has voluntarily delivered £140 million in targeted support to customers struggling with bills, including £22.4 million of direct help for prepayment customers.
Centrica said it does not expect any impact on its 2026 financial guidance as a result of the settlement.