Energy giant British Gas has paid out £2.65 million for issues surrounding exit fees after an investigation found the company misinformed and overcharged some customers.
Ofgem opened the investigation in July 2017 in response to evidence by Money Saving Expert into British Gas’ switching terms in February last year.
The regulator found the big six company wrongly charged 1,698 fixed deal customers exit fees totalling £64,968 when they switched supplier during the switching window.
A switching window is designed to encourage customers to switch to a better deal before they are rolled onto a default tariff at the end of their contract.
Under licence conditions, a customer is generally entitled to switch at any time during or after this window without having to pay an exit fee.
A further 94,211 customers were overcharged £782,450 after they decided to switch supplier during the switching window.
A system error meant the supplier did not extend these customers’ fixed-term contracts and instead wrongly rolled them onto its more expensive standard variable tariff rate.
The same system error also led to 18,095 customers who decided to switch being wrongly charged at a cheaper rate.
British Gas refunded in full all customers who had been overcharged by more than £1 and paid £502,633 in compensation to them, before the investigation concluded.
The £2.65 million figure includes refunds, compensation and redress.
A Centrica spokesperson said: “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.”
Following Ofgem’s findings, British Gas agreed to pay a further £244,770 in compensation to customers wrongly charged exit fees and the standard variable tariff and pay £1,050,229 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.
“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.”
Before and during the investigation, British Gas corrected its terms and conditions for customers to make clear they would not be charged exit fees during the switching window and changed its procedure for producing this information.
The supplier also agreed to appoint an external auditor to review the relevant policies and procedures and has committed to implement its “reasonable” recommendations once the audit has been completed.
In response to the investigation, Guy Anker, deputy editor at Money Saving Expert, 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.
“And 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.”