British Gas agrees settlement in relation to Ofgem’s investigation of unfair treatment of prepayment meter customers

Ofgem has closed its investigation into British Gas on its treatment of customers who had a prepayment meter (PPM) installed without their permission, with consumers set to benefit from the settlement agreement made with the regulator.  

Ofgem’s investigation concluded that British Gas failed to meet the standards required of an energy supplier when installing prepayment meters, and that it breached licence conditions specifically designed to protect customers in vulnerable situations.   

In recognition of Ofgem’s findings, British Gas has agreed to pay a £20 million payment into Ofgem’s Voluntary Redress Fund.   

In addition, British Gas has agreed to a settlement package which includes: 

• Compensation to affected customers in the period 2018-21. These payments are in addition to the compensation British Gas had already proactively paid to affected customers in the period 2022-23.
• Writing off up to £70 million of energy debt for vulnerable customers in accordance with a framework agreed by Ofgem, a proportion of which may be used as compensation for some customers.
• Continuing to provide the remainder of a £22.4 million voluntary support package British Gas launched in 2023, aimed specifically at supporting PPM customers.
• Creating a new Vulnerable Customers Debt Advisory Panel to inform and support British Gas in its ambition to develop industry-leading practices in the treatment of vulnerable customers in debt.  

Customers who are due compensation will be contacted by British Gas and do not need to take any action. Compensation will be credited or paid directly to customers. 

The investigation has been one of the most detailed and complex in the regulator’s history, involving analysis of customer cases and a comprehensive review of all British Gas’ related policies and procedures over a five-year period, covering every aspect of customer debt journeys.  

Ofgem also gathered and reviewed evidence from Citizens Advice and the Energy Ombudsman about thousands of customer experiences in relation to the case.  

British Gas accepts that it fell short in its treatment of vulnerable customers in the installation of PPMs and has taken action to address these failings. It has also committed to develop industry-leading practices in the treatment of vulnerable customers in debt going forward.  

As a result of British Gas agreeing to these actions, Ofgem considers that this investigation is suitable for resolution via alternative action, as per its Enforcement Guidelines. 

Tim Jarvis, CEO of Ofgem, said:  

“It is clear that British Gas fell short in its treatment of an unacceptable number of vulnerable customers who had a PPM installed without consent, and it’s right that they’ve taken action to put things right. Because of our action customers will receive a substantial package of redress, compensation and debt write off. 

“The installation of prepayment meters under warrant should only be a last resort, with rigorous checks to ensure debt is recovered lawfully, proportionately and safely. Smart pay as you go meters are a positive choice for many customers, helping them stay in control of their energy use and reporting high levels of satisfaction. Anyone worried about paying their bill should contact their supplier as early as possible to access the support available and discuss the options that suit their circumstances. 

“This investigation forms part of Ofgem’s wider work to raise standards across the energy market and strengthen consumer protections. We continue to challenge suppliers to do more to identify and support customers in difficulty and proactively offer support, and our priority remains driving lasting improvements so customers can have confidence they will be treated fairly.” 

Ofgem recognised that identifying and responding to vulnerability is complex, particularly across millions of customers. However, Ofgem concluded that British Gas’ conduct during the period assessed failed to meet the standards required of an energy supplier in its treatment of vulnerable customers. 

In particular, the investigation identified cases where a PPM was fitted under warrant when it was not appropriate to do so, having regard to the serious impact this could have given the circumstances of some customers. 

Ofgem also found that some of the failings underlying these breaches had been brought to the attention of British Gas’ management, through an external review in 2018 and an internal audit in 2021, which flagged certain organisational performance deficiencies. Whilst remedial actions were undertaken in response to those findings, Ofgem concluded these actions were inadequate, improvements were not sustained and sufficient action to address those issues was taken only following the commencement of Ofgem’s investigation. 

The investigation relates to historical practices, and the company has not been active in installing prepayment meters under warrant since it voluntarily suspended the activity at the beginning of February 2023 immediately after issues first emerged.  

British Gas has since implemented a number of actions, including strengthening governance and oversight, operational procedures and enhancing escalation practices.  The company has also improved data and vulnerability identification and introduced additional safeguards in line with Ofgem’s PPM Code of Practice, which is now part of the licence condition all suppliers must follow. British Gas will also obtain appropriate independent assurance of the changes that it has implemented to its policies, processes, and operational practices.  

A separate Market Compliance Review by Ofgem assessed conduct across the wider energy sector in relation to PPM installations across the period 2022 to 2023, resulting in eight suppliers paying a combined £73.6 million in compensation, debt write-off and hardship payments.  

Notes to editors 

• Any customer that is concerned about being able to pay their energy bill should contact their supplier as soon as possible to discuss their payment options, and any support that may be available to them.   
• You can find more information about the rules suppliers must follow before restarting installations of a prepayment meter without a billpayer's consent here: Check energy suppliers that can install prepayment meters without household permission | Ofgem
• Suppliers that have been given permission to restart must also follow strict conditions before a PPM can be considered, including making at least 10 attempts to contact a customer, carrying out a site welfare visit, and refraining from any installations in homes where there is someone aged over 75, under 2, or where a resident relies on a continuous energy supply for health reasons.