Challenger energy provider Utilita has agreed to pay £500,000 in compensation after it overcharged almost 40,000 customers.
Ofgem, the industry watchdog, said prepayment customers were overcharged by a total of more than £125,000.
Pre-payment customers are some of the most vulnerable as they are often those who struggle to pay their energy bills.
Ofgem said the affected customers have now been refunded by Utilita and will also receive at least £10 in a goodwill payment as part of the compensation package.
Utilita has agreed to pay £500,000 in compensation to customers after it overcharged them
A further payment of £140 will also be made to around 900 Utilita customers who applied to the supplier for the Government’s Warm Home Discount scheme but were unsuccessful.
An additional £45,000 will be paid into Ofgem’s Voluntary Redress Fund as part of the £500,000 payout.
The regulator said its investigations found around 6,600 prepayment customers were overcharged by a total of £22,700 over the prepayment price cap.
Meanwhile, around 33,000 customers were overcharged by a total of £105,000 over what they should have paid under their advertised energy tariff.
Utilita reported itself to the regulator for mistakenly overcharging customers between May and September 2019.
Bill Bullen, Utilita’s CEO, said: ‘I would like to apologise unreservedly to all customers who were temporarily out of pocket. I am sorry that we did not issue prompt refunds during the period in question.
‘We know we can always improve and will always take on board criticism of any legitimate failings.
‘Ofgem made it clear that the overcollection was caused by our failure to carry out an administrative process that corrected the temporary overcollection.
‘I can reassure customers that the issue was not with the tariff itself, which was confirmed to be in accordance with the cap.’
Suppliers cannot charge prepayment meter customers more than the level of the cap, which ensures they pay a fair price for their energy.
Ofgem sets the level of the cap and monitors suppliers’ compliance to make sure they do not charge customers more than the level of the cap.
Thousands of households found they were overcharged by Utilita, a challenger supplier
Cathryn Scott, director of enforcement and emerging issues at Ofgem, said: ‘Ofgem closely monitors suppliers’ compliance with the price cap, which ensures consumers pay a fair price for their energy.
‘This case sends a message to all suppliers that Ofgem will intervene if they charge customers above the level of the cap or above advertised tariffs.
‘It also shows that, where appropriate, Ofgem is prepared to work with suppliers who have failed to comply with their obligations but who have self-reported and are willing to put things right quickly.’
Richard Neudegg, head of regulation at Uswitch, added: ‘Utilita’s overcharging affected almost 40,000 prepayment customers, a group which includes vulnerable people.
‘While the amounts overcharged would likely have been relatively small for most, it’s really important that customers have confidence their supplier is charging them accurately.
‘It is positive to see that Utilita has agreed to pay £500,000 in redress, and will compensate all affected customers. In particular, focusing payments towards customers likely in the most vulnerable circumstances.
‘Utilita has now refunded affected customers. But any customer who believes they may have been affected but have not heard from Utilita should contact the supplier.’
The energy price cap, introduced by Ofgem, was launched in January 2019 as a way of keeping down the cost for households across the UK.
It is currently set at £1,042 for standard variable tariff customers whilst the savings are bigger for prepayment meter customers whose bills are capped at £1,069.
Suppliers are not allowed to charge above the cap but they can offer cheaper deals for savvy customers.
Recently it was revealed the cap has been extended will remain in place until the end of 2021 when the level will be reviewed.
However, customers stuck on pricey tariffs are encouraged to use price comparison services to see if they could save money by switching to a different supplier or move to a fixed tariff, which are typically much cheaper than default options.
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