British Gas to cough up £20m for ‘unfair treatment’ of vulnerable customers
British Gas is set to cough up £20m after the watchdog closed an investigation into the energy giant and found it “fell short in its treatment of an unacceptable number of vulnerable customers”.
The investigation looked into British Gas’ treatment of customers who had prepayment meters (PPMs) installed without permission, with consumers set to benefit from the settlement agreement.
Ofgem concluded that British Gas failed to meet the standards required of an energy supplier when installing prepayment meters and ultimately breached licensing conditions specifically designed to protect customers in vulnerable situations.
British Gas, which is owned by energy giant Centrica, has agreed to make a £20m payment into Ofgem’s Voluntary Redress Fund.
Centrica’s share price tumbled 1.9 per cent in early trading to 198.3p, hurting its bullish year to date run, with the company up 13.7 per cent as it continues to capitalise on the renewable energy transition.
The settlement package
Under the terms of the settlement, British Gas must also pay compensation to affected customers in 2018 to 2021, with these payments to be in addition to the compensation it had already proactively paid to affected customers in 2022 to 2023.
It must also write off up to £70m of energy debt for vulnerable customers, some of which may be used as compensation, and continue to grant the remainder of its £22.4m voluntary support package, which was launched in 2023 to support PPM customers.
Ofgem will also create a new Vulnerable Customers Debt Advisory Panel to inform and support British Gas in its ambition to develop industry-leading practices in the treatment of vulnerable customers in debt.
Tim Jarvis, chief executive of Ofgem, said: “It is clear that British Gas fell short in its treatment of an unacceptable number of vulnerable customers who had a PPM installed without consent, and it’s right that they’ve taken action to put things right.
“The installation of prepayment meters under warrant should only be a last resort, with rigorous checks to ensure debt is recovered lawfully, proportionately and safely.”
Centrica Response
Chris O’Shea, chief executive of Centrica, said: “What happened should never have happened, and I am sorry to the prepayment customers who were affected. When we get things wrong, we make them right.”
He added: “Over the last three years, we have treated this matter with the seriousness it deserves and have made changes to our practices and put safeguards in place to ensure we deliver the standards our customers have every right to expect.”
Minister for Energy Consumers Martin McCluskey said: “Consumers deserve an energy market they can trust. That trust was broken for too many families affected by the forced installations of prepayment meters, which was an unacceptable national scandal.
“It is good to see Ofgem standing up for people and British Gas taking responsibility to put things right. They must make sure the victims see every penny of the compensation they are owed.
“Our reforms, including those we set out last month to strengthen the energy regulator, will help make sure injustices like these never happen again – incentivising companies to act in customers’ best interests and empowering Ofgem as a true consumer champion.”
The PPM scandal
Three years ago it emerged that debt agents working for British Gas had broken into homes of vulnerable customers to fit prepayment meters.
Ofgem subsequently banned the practice of fitting PPMs without customers’ permission in high-risk households.
Prepayment meters require customers to pay for their energy use in advance, either through accounts or by adding credit to a card in a convenience store or Post Office.
Strict rules also apply that prevent energy suppliers moving an at-risk customer onto a prepayment meter if they are struggling to pay, as having one is a more expensive method of paying than by direct debit.
But in some cases it is the only option for people struggling to pay and are in debt to an energy supplier and many rented properties also have prepayment meters.
Problems can arise when residents no longer have any credit left on the meter and have no money to top it up, leaving them unable to cook or heat their homes.