British Gas pays out £2.65 million over invalid exit fees and overcharging

Publication date
29th August 2018
Information types
Policy areas
  • British Gas wrongly charged 94,211 customers its more expensive standard variable tariff rate after they decided to switch to a new supplier, due to a system error
  • British Gas also wrongly informed 2.5 million customers that exit fees were chargeable and incorrectly charged exit fees to 1,698 fixed deal customers
  • The supplier agreed to pay £2.65 million in refunds, compensation to affected customers, and a payment into Ofgem’s consumer redress fund.

British Gas has paid £2.65 million in refunds, compensation and redress after it misinformed customers by issuing incorrect terms and conditions about exit fees, wrongly charged them to some customers and applied incorrect charges to others after their fixed deal came to an end.

Ofgem’s investigation found that British Gas provided 2.5 million customers with incorrect terms and conditions, which stated that exit fees were payable 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.  

This switching window is designed to encourage customers to switch to a better deal before they are rolled onto a default tariff at the end of their contract.

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.1

The same system error also led to 18,095 customers who decided to switch being wrongly charged at a cheaper rate.

Ofgem opened an investigation in July 2017 following concerns raised by 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. Many more customers could have been deterred from getting a better deal due to the incorrect terms and conditions. 

“Ofgem put in place the switching window to help all customers switch before they are rolled onto their supplier’s expensive default rate.

“Our enforcement action against British Gas sends a strong message to all suppliers that they must respect their customers’ rights during the switching window and always treat customers fairly.”

Before and during the investigation, British Gas 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 producing this information.

The supplier also agreed to appoint an external auditor to review the relevant policies and procedures and has committed to implement its “reasonable” recommendations once the audit has been completed.

Ofgem is satisfied that British Gas has taken appropriate steps to contact, refund and compensate customers as soon as possible, as well as correcting its terms and conditions to make sure customers are not deterred from switching to a different supplier in the future.

Notes to editors

  1. When a customer switches supplier, during the switching window or within 20 working days thereafter, they will continue to be charged their same fixed rate deal until the switch is completed providing that the switch occurs within a reasonable period of time.
  2. Ofgem opened this investigation in July 2017 in response to evidence from MoneySavingExpert.com into British Gas’ switching terms in February 2017.
  3. The term ‘exit fees’ refers to Termination Fees as defined in the Supply Licence for the supply of gas and electricity. 
  4. British Gas agreed that its conduct fell short of the requirements set out in Standard Licence Conditions (‘SLCs’) 24.8, 24.9, 24.14, 24.14A and 25C of both gas and electricity supply licences.
  5. For more information about Ofgem’s consumer redress fund, see: Ofgem appoints Energy Saving Trust to distribute payments from rule-breaking energy companies to charities

Further information

For media, contact:

Michelle Amos: 0207 901 1881

Media out of hours mobile: 07766 511470 (media calls only)

About Ofgem

Ofgem is the independent energy regulator for Great Britain. Its priority is to make a positive difference for consumers by promoting competition in the energy markets and regulating networks.

For facts, figures and information about Ofgem’s work, see Energy facts and figures or visit the Ofgem Data Portal

For energy insights and updates straight to your inbox from Ofgem, please subscribe.

Follow us on Twitter @ofgemLinkedIn and Facebook.