- Publication date
- 2nd April 2015
- Information types
- Policy areas
- £7.75 million will be paid to Citizens Advice to help vulnerable consumers
- E.ON has already paid back around £400,000 to customers
- Penalty reflects E.ON’s repeated failing against Ofgem’s billing rules and the supplier’s late disclosure that prepayment meter customers were also affected
Ofgem has today secured £7.75m from E.ON after they incorrectly charged exit fees and/or overcharged customers following price rises. This is in addition to the approximately £400,000 E.ON has already paid back to potentially affected customers. It is in the process of refunding remaining customers to ensure they did not lose out financially.
Under Ofgem rules, suppliers have to give customers 30 days’ notice of a price rise; this allows customers a chance to switch before the increase takes effect. If a customer signals their intention to move supplier within the 30 days, they do not incur exit fees or the higher charge even if the switch occurs after the price rise. These arrangements give important protection to those customers who choose to switch in order to avoid a price rise.
E.ON was found to have made billing errors in respect of price rises in January 2013 and January 2014. These affected direct debit and standard credit customers. The average amount paid back was around £8 and £12 respectively. E.ON has made refunds to around 40,000 customers; however the number of customers actually affected by the issue is likely to be significantly less.
These rules apply equally to prepayment customers. Information showing that these customers were affected was only provided very late into our investigation. E.ON’s error resulted in around 500 prepayment customers for the January 2013 price increase and around 6,500 prepayment customers for the January 2014 price increase missing out on average a refund of £3.42. E.ON is tracking down these customers to provide refunds by the end of April. This error and the delay in providing the information is serious and E.ON has failed to protect these consumers. Ofgem has taken this into account in determining the level of penalty.
The level of penalty package today also reflects that E.ON has made the same error previously as well as making senior-level commitments that it rectified its processes. Also taken into account was that E.ON notified Ofgem of the billing issues and has cooperated throughout the investigation.
Sarah Harrison, senior partner in charge of enforcement said: “Ofgem’s rules give customers a chance to avoid exit fees and higher costs when suppliers put up prices. These are important customer protections and it is vital that suppliers play by the rules so customers are encouraged to engage in the market.
“E.ON’s errors meant customers who took the chance to switch were wrongly charged. It is important that E.ON has repaid potentially affected customers and cooperated with the investigation. However it’s absolutely unacceptable that E.ON failed to provide these vital customer protections yet again and this persistent failure is the reason for the high penalty."
Notes to editors
The £7.7 million payment will go towards the Energy Best Deal Extra project run by Citizens Advice.
Following reports from E.ON, we opened an investigation into the errors in June 2014 in relation to its 2013 price increase which was expanded in July 2014 to include E.ON’s 2014 price increase.
In November 2012, E.ON paid a £1.7m package (£1.4m to consumers affected, £300,000 in lieu of penalty paid to Age UK) for incorrectly charging exit fees or overcharging customers following price rises.
Ofgem issued an open letter in March 2014 setting out its intention to place a greater emphasis on deterrence when imposing penalties for future breaches and that this is likely to mean a substantial increase in the level of penalties we impose. This applies where evidence of rule breaking comes to our attention on or after 1 June 2014.
For further press information contact:
Lisa O’Brien: 020 7901 7426
Dafydd Wyn: 020 3263 9943
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