Utility giant E.ON has been penalised nearly £8 million after customers who wanted to switch supplier in the wake of price rises were incorrectly charged.
It is the second time the company has been rapped on the issue by regulator Ofgem after a similar error impacted 94,000 former customers prior to 2011.
Ofgem said the size of the penalty – £7.75m – which will be handed to Citizens Advice in order to help vulnerable customers, reflected E.ON’s “repeated failing” on billing rules after it imposed fees and overcharged customers who sought to leave the firm in the wake of price rises in January 2013 and 2014.
The company has since paid back up to £12 to around 40,000 customers and is also working to refund as many as 6,500 pre-payment customers.
The regulator said E.ON’s errors meant customers who took the chance to switch suppliers after the bill rises were wrongly charged.
Companies are not supposed to apply exit fees if a customer signals their intention to move supplier within the standard 30-day notice period of a price rise. This is the case even if the switch occurs after the price rise.
Sarah Harrison, Ofgem’s senior partner in charge of enforcement, said: “Ofgem’s rules give customers a chance to avoid exit fees and higher costs when suppliers put up prices.
“These are important customer protections and it is vital that suppliers play by the rules so customers are encouraged to engage in the market.”
In November 2012, E.ON paid a £1.7m package for incorrectly charging exit fees or overcharging customers following price rises.
Harrison added: “It’s absolutely unacceptable that E.ON failed to provide these vital customer protections yet again and this persistent failure is the reason for the high penalty.”
The errors in respect of price rises in January 2013 and January 2014 affected direct debit and standard credit customers. The average amount paid back was around £8 and £12 respectively.
E.ON’s penalty payment will go towards the Energy Best Deal Extra project run by Citizens Advice.
Its chief executive, Gillian Guy, said: “Ofgem is right to clamp down on this kind of failure. This ruling will send a strong message to the whole industry that consumer rights cannot be ignored.
“It is positive that the Ofgem penalty will go towards helping people who are struggling to heat and light their homes. It is also encouraging that E.ON owned up to the problem and is both providing direct redress and taking steps to make sure this doesn’t happen again.”