18 energy suppliers failed on price protection rules

Over 1 million customers were overcharged more than £7.2m between 2013 and 2020.

The failures occurred when customers were switching from one supplier to another but their supplier failed to protect their existing tariff during the switching process.

Regulator Ofgem say they have decided they won't take enforcement action following the suppliers' engagement with them, although they warn future failures may be subject to formal action.

Supplier failures

Ofgem's investigations found customers of 18 energy suppliers were overcharged by more than £7.2m over an eight-year period, with some customers out of pocket by hundreds of pounds.

The suppliers who reported failures were: Bristol Energy, British Gas, E, E.On, EDF, Engie, ESB Energy, Green Star Energy (since acquired by Shell), Npower, Octopus Energy, Orbit, OVO Energy, PFP Energy, Scottish Power, Shell, So Energy, SSE (since acquired by OVO) and Utility Warehouse.

Most affected customers were with one of the major suppliers, although OVO were the worst offender in terms of customer numbers with over 240,000 affected through their brand alone. Shell had the second highest figure of over 225,000 while Scottish Power were behind them with over 155,000 affected customers.

In terms of the amount overcharged to customer accounts, those three suppliers made up a large proportion of the £7.2m:

• OVO customers were overcharged by £2m
• Scottish Power customers were overcharged by £1.5m
• Shell customers were overcharged by £1m

All 18 energy companies are issuing refunds to customers where it's possible to do so. If they can't reach them, they will donate the money to the industry's voluntary redress scheme instead.

What went wrong?

Ofgem found three main types of failures in their compliance investigations:

1. Variable tariff customers who switched to another supplier did not have their variable tariff price protected during their switch
2. Fixed term tariff customers who switched to another supplier did not have their fixed tariff price protected during their switch
3. Fixed term tariff customers who moved to another tariff with their own supplier did not have their fixed tariff price protected during their switch

Each of these failures breached a different clause of the Standard Licence Conditions (SLC), but the root of each of them was that customers were not protected properly during a switch from one tariff to another.

Under industry rules, customers are shielded from price increases during their switch from one energy supplier to another (or to a different tariff with the same supplier) which can take up to three weeks.

There's more detail about switching your energy supplier in this guide.

Why does it matter?

Ofgem's compliance investigations have shone a light on the billing systems of many UK energy suppliers. In 18 cases, these have been shown to be faulty, and over a million customers have been overcharged because of them.

Several unnamed energy suppliers self-reported the issue to Ofgem, prompting the regulator to request every supplier check their records.

This self-reporting is part of the reason why Ofgem has opted for a compliance approach rather than an enforcement one, and they reiterate they're willing to work with suppliers who have made errors but who aim to put things right through self-reporting.

Back in December 2019, we saw Ofgem's highly critical response to (now defunct) iSupply when they failed to report breaches of the energy price cap affecting over 4,400 customers.

When fellow challenger Utilita experienced prepayment price cap problems a year later, they still paid compensation but Ofgem were satisfied with their decision to engage and self-report the issue.

With the energy price cap about to increase in April, Ofgem's timing with this ruling is a reminder to energy companies to be extra vigilant if their customers decide to switch to another energy provider.

Customers who do switch should read their final bills carefully and check they have been charged correctly for the energy used until the terms of their outgoing contract.