Shell Energy Retail will pay out a total of £390,000 after it overcharged customers on its default tariffs when the price cap was introduced at the start of this year.

The supplier will refund and compensate around 12,000 customer accounts and will pay £200,000 to Ofgem’s consumer redress fund.

Shell Energy has apologised to the affected customers and said it always intended to re-credit them. The price cap came into force on 1 January to protect 11 million customers on poor value default tariffs.

Ofgem’s price cap monitoring found that between January and March 2019 Shell Energy Retail overcharged around 12,000 electricity and gas customer accounts (8,800 customers) a sum of £100,736.63 collectively above the level of the price cap.

Shell Energy, which was trading under First Utility at the time of the breach, has agreed to refund the customers by re-crediting their accounts and will pay additional compensation to rectify its failings.

Ofgem said around 6,200 Shell Energy Retail customer accounts were on tariffs that were not compliant with the price cap, meaning they were paying above than the cap level for their energy supply.

The company has agreed to refund these customers and pay an additional £62,000 in compensation (£10 per fuel).

The remaining 5,600 customer accounts experienced a delay in their energy price being reduced under the price cap after they requested to change to a cheaper means of paying for their energy, which meant they were paying above the cap level for longer than necessary. Shell Energy has agreed to refund these customers and pay £29,000 in compensation (£5 per fuel).

The regulator has decided not to take formal enforcement action having considered the steps taken by the supplier to address the error.

A spokesperson for Shell Energy said: “We’d like to apologise to all customers who were temporarily out of pocket. For the vast majority of our customers we implemented the cap in line with Ofgem’s licence conditions. We had a small number of customers on fixed-price default tariffs to whom we didn’t apply the capped rates because most of these customers would have been better off remaining on their existing tariff.

“However, we recognise that there were some who would have been better off on the capped rates or who suffered a delay in changing their payment method. We always intended to re-credit these customers, which we are now doing together with a compensation payment and have agreed to pay into the Ofgem redress fund.”

Ofgem warned it will continue to hold suppliers to account if they do not meet their obligations. It will continue to monitor all suppliers’ approach to the implementation of the cap.

First Utility was acquired by Shell in March 2018 and rebranded as Shell Energy Retail in March this year.

The price cap is a temporary measure. Suppliers can price to the level or below the cap but cannot charge more.

The current level is £1,254 based on typical consumption. The revised level came into effect on 1 April and will run until 30 September.

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