Shell Energy’s supplier business has been fined for overcharging customers on default tariffs amid the cost of living crisis.
Ofgem has sanctioned the retail arm and ordered it to refund and compensate 11,275 prepayment customer accounts it has overcharged on its default tariffs.
The fine totalled over half a million pounds.
Customers were overcharged to the tune of £106,000, and refunds will be issued automatically to affected energy users.
In addition, the supplier must pay £400,000 to the watchdog’s voluntary consumer redress fund and £30,970 in goodwill payments to affected customers, equating to a total payment of £536,970.
In March 2022, Shell Energy Retail discovered that due to operational errors with the implementation of its default tariffs, it had overcharged some of its customers for periods of time between January 2019 and September 2022.
Tariff updates were sent to prepayment meters to amend rates in response to changes in the level of the price cap, but due to a variety of operational issues, not all meters were successfully updated to the revised rates.
This meant over 11,000 prepayment customers paid above the rates allowed under the price cap at the time.
The average amount being refunded to affected customers is £9.40
This is not the first time Shell Energy Retail has overcharged customers, with the supplier agreeing in 2019 to refund and compensate 12,000 customer accounts it overcharged when the price cap was introduced.
It was trading as First Utility at the time of breach.
However, whilst this issue represents a serious matter, taking into account that Shell Energy Retail Limited self-reported the issue and has put in place steps to address the failings,
However, Ofgem has decided not to take formal enforcement action, as the supplier self-reported the issue and has put in steps to address the failings.
Neil Lawrence, Director of Retail, Ofgem said “Ofgem expects suppliers to adhere to the terms of contracts they have with customers, particularly ensuring they pay no more than the level of the price cap. Households across Britain are already struggling with rising energy bills and living costs. Overcharging by suppliers can cause additional and unnecessary stress and worry at what is already a very challenging time for consumers across the UK
Ofgem is always prepared to work with suppliers who have failed to comply with their obligations, but who have self-reported and are determined to put things right, as Shell has done here. The contributions Shell has made to the redress fund will help to support vulnerable consumers with their energy bills.”
The developments come ahead of an expected announcement of a vast hike in the consumer price cap tomorrow to £3,500 per year, with energy bosses rallying around the idea of a price cap freeze to ease suffering this winter.
The price cap will also be updated quarterly, raising the prospect of two increases in the mechanism this winter.