Lucy Hooker
Business reporter
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Tens of thousands of energy customers are set to receive payouts of up to £1,000 each, and could see debts written off, in response to the scandal over the forced fitting of prepayment meters.
Energy companies are paying out more £70m in compensation and financial support to customers.
It follows a review by the regulator, Ofgem, of the way suppliers switched often vulnerable customers to paying upfront, without their agreement, after they fell behind with their bills.
Energy UK, representing energy firms, said suppliers had worked hard to “put things right”, following the intervention by Ofgem.
Eligible customers could receive payments starting at £40, rising to £250 or £500, depending on the way they were treated by their energy supplier, or where processes were not followed adequately.
The £1,000 payments were for customers who had faced “inappropriate installation”, Ofgem said.
Some may already have received help, or have been contacted by their energy supplier. If not, customers did not need to take any action, Ofgem said, as compensation would be paid directly into customer accounts.
“Our priority has been to put things right for those who weren’t treated properly, and ensure we don’t see bad practice repeated,” said Tim Jarvis, Ofgem’s director general of markets.
The scandal erupted two years ago, at the peak of the cost of living crisis, with energy prices spiking after Russia’s invasion of Ukraine.
It emerged that energy firms were switching people who were struggling to pay their bills onto prepayment methods, either by remotely changing their smart meter to prepay mode, or by entering the property to install a new meter.
There was a particular outcry when agents for British Gas were found to have forced their way into the homes of vulnerable people.
Ofgem responded by suspending all forced installations and launching a review of the practice from January 2022 to January 2023.
That review has found that suppliers “fell short of required standards” in the way they had treated customers.
However, the nearly £74m Ofgem announced was being dispersed applies only to customers at eight suppliers:
- Scottish Power
- EDF
- E.ON
- Octopus
- Utility Warehouse
- Good Energy
- Tru Energy
- Ecotricity
These firms had already disbursed £55m in financial support, Ofgem said. Another £5.6m would be paid in compensation to 40,000 affected customers. A further £13m would be used to write off debt for customers who had had a forced meter installation.
Enforcement investigations are continuing for British Gas, Utilita and Ovo, representing tens of thousands more customers.
A new code of practice is now in place with stricter conditions that companies must meet if they want to install prepayment meters without customer consent.
Dhara Vyas, chief executive of Energy UK, which represents energy firms, said suppliers had been working closely with Ofgem to meet the regulator’s requirements, but said there were instances where forced fittings were appropriate.
“Involuntary installations have been a last – but necessary – resort for cases where repeated attempts to address debt with the customer through other means have been unsuccessful,” she said.
“It’s bad for customers to fall further and further into arrears, and bad debt ultimately drives up the prices that is paid by all customers,” she added.
Dame Clare Moriarty, chief executive of the charity, Citizens Advice, said she would like to see the sector work quickly to disburse compensation to the worst affected.
“While it’s right that those rules have been tightened, it’s also vital that consumers get compensation for the distress that was caused,” she said.
