Ovo Energy and Good Energy have been ordered to pay £4m after overcharging thousands of households on their gas and electricity bills by breaching the government’s energy price cap.
The affected households will receive a combined total of £2.7m from the two companies while an extra £1.25m will go to vulnerable customers in the UK under Ofgem’s voluntary redress fund.
Ofgem, the energy regulator for Great Britain, found Ovo overcharged almost 11,000 customers by nearly £1.5m, or an average of £181 for each household, by failing to apply the government’s energy price guarantee, which sets a maximum rate for every unit of energy used between last October and March.
Good Energy overcharged just under 7,000 households a total of £391,650, or about £109 on their energy bills.
The suppliers will repay the amounts to their customers and have been ordered to make extra compensation payments for the “totally unacceptable” breach to the Ofgem fund.
Good Energy will pay £1.25m to the redress fund “for the inadequate systems, processes and repeated inaccurate reporting of information” over an extended period, the regulator said.
The regulator said Ovo’s contribution to the fund – just £10,000 – would have been considerably higher had the supplier not quickly reported the problem to Ofgem and resolved it.
The energy price guarantee, under which the government subsidises energy bills, was introduced last October to shield households from the soaring price of wholesale gas linked to the war in Ukraine. The policy aims to limit typical annual bills for an average household to £2,500 and was extended at that rate after a U-turn by the chancellor, Jeremy Hunt, in March.
Dan Norton, the Ofgem deputy director of retail, said it was “totally unacceptable” that Good Energy and Ovo customers were overcharged, “particularly at a time that is already so challenging and stressful for consumers across the UK”.
He added: “Energy suppliers should hear this loud and clear: we expect suppliers to act with the utmost care and integrity. We will continue to hold them to account if they do not meet their customer protection or reporting obligations.”
Grant Shapps, the energy security secretary, said it was “extremely frustrating” to see that some homes did not receive protection from record energy bills even after the government “took unprecedented steps to protect households at a time when bills risked spiralling and families were dangerously exposed to volatile global energy costs”.
“It’s right these suppliers now pay the price for their oversight and offer redress to those wronged. I’m glad to see Ofgem taking action where suppliers have fallen short and using the proceeds to support vulnerable consumers,” he said.
The Good Energy chief executive, Nigel Pocklington, said the company was contacting the households affected to apologise and issue refunds and goodwill payments.
“We are very sorry that we let some of our customers down and promise to put things right,” Pocklington said. “Every customer payment method change is now being checked and the formal improvement plan we have submitted to Ofgem includes new automated processes, standards and governance to prevent any similar mistake in future.”
Ovo said the supplier had noticed the error immediately and reported it to Ofgem. A spokesperson said it had since resolved the problem with its system and made compensation payments to the customers affected.
