An investigation by Ofcom found that British Gas had told 2.5 million customers that they would have to pay an exit fee during the 49 day period before their fixed deal expires. Under licence conditions, a customer is generally entitled to switch at any time during or after this “switching window” without having to pay an exit fee.
British Gas wrongly charged 1,698 of its fixed deal customers exit fees totalling £64,968 when they switched supplier during the switching window.
A further 94,211 customers were overcharged £782,450 by British Gas after they decided to switch supplier during the switching window. Due to a system error, the supplier did not extend these customers’ fixed-term contracts, instead wrongly rolling them onto its more expensive standard variable tariff rate.
Ofgem opened an investigation in July 2017 following concerns raised by consumer watchdog MoneySavingExpert.com.
Before the investigation concluded, British Gas refunded in full all customers who had been overcharged by more than £1 and paid £502,633 in compensation to them.
Following Ofgem’s findings, British Gas agreed to pay a further £244,770 in compensation to customers wrongly charged exit fees and the standard variable tariff and pay £1,050,229 into Ofgem’s consumer redress fund.
Anthony Pygram, director of conduct and enforcement at Ofgem, said: “British Gas failed its customers who were coming to the end of their fixed contracts and switched supplier by unfairly penalising them and applying charges in error.”
Peter Earl, head of energy at Compare the Market, said: “That’s one way to deal with a customer exodus – charge them to leave when you’re not entitled to. This shoddy behaviour, coupled with better deals elsewhere, is precisely why so many people are leaving the Big Six in droves.”
Guy Anker, deputy editor at MoneySavingExpert.com, said: “Such behaviour by big suppliers totally undermines the concept of switching by falsely putting people off with the threat of false charges. Then to actually overcharge tens of thousands of people rubs salt into the wound.”
British Gas has since corrected its terms and conditions for customers to make clear they would not be charged exit fees during the switching window and changed its procedure for providing this information.
It also agreed to appoint an external auditor to review the relevant policies and procedures and has committed to implement its “reasonable” recommendations.
A Centrica spokesman said: “A system error led to a small proportion of customers being incorrectly charged. We’ve apologised to the customers affected. Those who were charged too much were promptly refunded.”