Centrica's British Gas owes GBP20 million in redress after Ofgem probe

(Alliance News) - Centrica PLC on Friday said that its subsidiary British Gas Trading Ltd has agreed to pay GBP20 million in redress following an Ofgem investigation into its prepayment meters.

Windsor, England-based energy firm Centrica's British Gas was the subject of a probe by the UK regulator for the electricity and downstream natural gas markets, focused on the installation prepayment meters without customers' permission.

Ofgem has closed the investigation, concluding that British Gas "failed to meet the standards required of an energy supplier when installing prepayment meters, and that it breached licence conditions specifically designed to protect customers in vulnerable situations," the regulator disclosed.

"Ofgem also found that some of the failings underlying these breaches had been brought to the attention of British Gas' management, through an external review in 2018 and an internal audit in 2021, which flagged certain organisational performance deficiencies. Whilst remedial actions were undertaken in response to those findings, Ofgem concluded these actions were inadequate."

The GBP20 million in compensation owed by British Gas includes payments to customers impacted between 2018 and 2021, in addition to compensation which British Gas had already paid to those affected between 2022 and 2023.

British Gas also will write off up to GBP70 million in energy debt for "vulnerable customers...a proportion of which may be used as compensation for some customers," Ofgem said.

The remainder of a GBP22.4 million support packaged which British Gas launched back in 2023 will still be payable.

Ofgem noted that customers did not need to take action, as they would be contacted directly. British Gas is planning "a comprehensive review of its customer records" to identify those owed compensation.

Additionally, British Gas is setting up a panel to advise on its treatment of vulnerable customers in debt.

"British Gas accepts that it fell short in its treatment of vulnerable customers in the installation of PPMs and has taken action to address these failings...As a result of British Gas agreeing to these actions, Ofgem considers that this investigation is suitable for resolution via alternative action," the regulator reported.

It had carried out a separate market compliance review of the wider energy sector related to PPM installations from 2022 to 2023, leading eight suppliers to pay a combined GBP73.6 million in compensation, debt write-off and hardship payments.

Centrica stressed that it has not restarted warrant-based prepayment meter installations since suspending the practice in February 2023 and adds the settlement will not affect its 2026 financial guidance.

Chris O'Shea, chief executive of Centrica, commented: "What happened should never have happened, and I am sorry to the prepayment customers who were affected. When we get things wrong, we make them right. When these issues came to light in 2023 - we apologised, stopped the activity immediately and took rapid action to improve our processes and change how we engage with customers in debt, particularly those in vulnerable situations.

Over the last three years, we have treated this matter with the seriousness it deserves and have made changes to our practices and put safeguards in place to ensure we deliver the standards our customers have every right to expect.''

Centrica shares fell 1.8% to 198.55 pence on Friday morning in London.

By Holly Munks, Alliance News reporter

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