Shell Energy is to refund and compensate 11,275 prepayment customer accounts after they were overcharged.
The energy giant will refund £106,000 and also hand out £30,970 in goodwill payments to affected households.
Shell admitted that thousands of people on default tariffs paid above the rates allowed under the Ofgem price cap, after not all meters were updated correctly with new rates.
When the price cap changes, energy suppliers need to send updates to customer prepayment meters.
Shell overcharged customers throughout the price cap window between January 2019 and September 2022, with the new price cap due to come into place on October 1.
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The problem was caused by "operational issues" and Shell self-reported itself to Ofgem.
Refunds will be issued automatically to affected customers - meaning you shouldn't need to do anything to receive the cash.
Shell said each customer will get roughly £9.40 back in the form of a refund, along with the compensation on top.
The energy firm will also pay £400,000 to the Ofgem voluntary consumer redress fund, which hands out money to charities, trusts, organisations and consumers and is separate to customer compensation.
Shell will pay out £536,970 in total after the Ofgem ruling.
Shell had previously agreed to refund and compensate 12,000 customer accounts it overcharged in 2019 when the price cap was introduced.
The company was trading as First Utility at the time of breach.
Neil Lawrence, Director of Retail at 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.”
A Shell Energy spokesperson said: “We’re sincerely sorry that errors updating our prepayment meter rates resulted in some customers being overcharged for a period of time.
“As soon as we identified the issue we began taking steps to put it right, and self-reported it to Ofgem.
“The overcharge, which averages £9.40 per customer, will be refunded along with a gesture of goodwill. We will be writing to customers to let them know.”
Have you been overcharged by your energy company? Let us know: mirror.money.saving@mirror.co.uk
