The supplier was referred by Citizens Advice in June 2015 after it saw a steep increase in complaints caused by the introduction of a new IT system in March last year. The new system resulted in billing delays, problems logging into online accounts and direct debit updates stopped. New customers also experience delays transferring to the supplier.
The firm has already paid £1.6 million and the remainder will be paid shortly to customers not yet compensated. The money that it is unable to return to customers will go to the charity Step Change to help energy consumers who are in financial difficulties.
Co-operative Energy also voluntarily withdrew from marketing activities to help focus on improving its services to its existing customers.
Co-Operative chief executive of Midcounties Ben Reid said: “As the UK’s only member-owned energy supplier, we put our customers at the heart of everything we do and their interests first. We have apologised to those customers who were affected by the problems we experienced when we introduced a new IT system last year. The system issues are now resolved and we have made significant improvements to our service.”
The regulator says that Co-op Energy has given assurances that adequate processes and systems are now in place to ensure it meets its obligations.
Ofgem senior partner Martin Crouch said: “While customers experienced unacceptable levels of service, Co-operative Energy has done the right thing by taking responsibility for the situation and paying out compensation to those people affected.
“If trust is to be restored in the energy market suppliers must make amends to their customers when things go wrong. We want all suppliers to constantly ensure customers are treated fairly.”
In June this year, Ofgem ordered Scottish Power to pay £18 million for failing customers, and in January hit Npower with a record sum of £26 million to pay for complaints handling.