Ofgem contacted Co-operative after customers complained that they were unable to log into their accounts online, leaving them unable to submit meter readings or check their bill. Bills were delayed and direct debit updates stopped, while new customers also experienced delays in transferring to the supplier.
Co-operative said the problems were the result of the introduction of a new IT system in March last year and added it had voluntarily withdrawn from marketing activities to help focus on improving its services to its existing customers.
ScottishPower has also previously come under fire from consumers after a series of failings caused by the introduction of a new computer system.
Ben Reid, chief executive of Midcounties Co-operative said: “As the UK’s only member-owned energy supplier, we put our customers at the heart of everything we do and their interests first.
“We have apologised to those customers who were affected by the problems we experienced when we introduced a new IT system last year. The system issues are now resolved and we have made significant improvements to our service.”
Watchdog Ofgem said that £1.6m of the money had already been paid with the remainder to be paid shortly to those customers not yet compensated. Any cash that Co-op is unable to return to customers will go to the charity StepChange to help energy consumers who are in financial difficulties.
Martin Crouch, senior partner at Ofgem, said the company had also taken too long to resolve a significant number of the complaints made by customers
He said: “While customers experienced unacceptable levels of service, Co-operative Energy has done the right thing by taking responsibility for the situation and paying out compensation to those people affected.”
“If trust is to be restored in the energy market suppliers must make amends to their customers when things go wrong. We want all suppliers to constantly ensure customers are treated fairly.”
Claire Osborne, energy expert at uSwitch.com, said: “This large settlement with Ofgem shows that energy suppliers simply cannot afford to fail in basic customer service.
“Co-operative Energy, which recently hiked prices by three per cent, experienced serious problems with its online services, leaving customers unable to access accounts, submit meter readings or check bills.
“Ofgem’s tough stance on this is a clear sign to the wider industry that customers must be treated fairly. Poor service will simply not be tolerated.”