Centrica PLC’s (LON:CNA) British Gas has agreed to pay £2.65mln to customers who were overcharged for switching energy suppliers, the UK watchdog said on Wednesday.
Ofcom’s investigation into British Gas found the energy supplier provided 2.5 million customers with incorrect terms and conditions about exit fees.
The terms and conditions stated that exit fees were due to be paid during the 49-day period before a fixed deal ends.
But under Ofcom's rules, customers are entitled to switch providers at any time during this switching window without having to pay an exit fee to allow them to move over to a better deal before they are rolled onto a default tariff at the end of their contract.
Ofcom said British Gas wrongly charged 1,698 of its fixed deal customers exit fees totalling £64,968 when they changed supplier.
British Gas was also accused of overcharging another 211 customers by £782,450 for switching providers and for failing to extend their fixed-term contracts and instead rolling them onto its more expensive standard variable tariff rate due to a system error.
British Gas amends terms and conditions
The energy company has refunded all affected customers by more than £1 and paid £502,633 in compensation. It has agreed to pay a further £244,770 in compensation to customers who were wrongly charged exit fees and the standard variable tariff and pay £1.05mln into Ofgem’s consumer redress fund.
“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,” Anthony Pygram, director of conduct and enforcement at Ofgem.
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.”
READ: Centrica says British Gas Standard Variable Tariff to rise by 3.8% for existing customers from October 1
British Gas has corrected its terms and conditions for customers to make clear customers would not be charged exit fees during the switching window. The company has appointed an external auditor to review the relevant policies and procedures.
Ofgem said it was satisfied British Gas has taken appropriate steps to contact, refund and compensate customers as well as correcting its terms and conditions.