British Gas to wipe £70 million in customer debt

British Gas will write off up to £70 million in energy debt for vulnerable customers to settle Ofgem’s investigation into forced prepayment meter installations.

The total package runs to as much as £112 million in compensation and debt write-offs, the largest settlement ever secured by Ofgem, and follows what the regulator described as one of the most complex investigations in its history.

British Gas will also pay £20 million into Ofgem’s Voluntary Redress Fund, continue the remainder of a £22.4 million voluntary support package launched in 2023, and pay additional compensation to customers affected between 2018 and 2021, on top of payments already made to those affected between 2022 and 2023.

Ofgem said that British Gas had failed to meet the standards required of an energy supplier when installing prepayment meters and had breached licence conditions designed to protect customers in vulnerable situations.

The regulator said it had identified cases where a meter was fitted under warrant when it was not appropriate to do so, given the serious impact this could have on the customer.

The probe covered five years of customer debt journeys and drew on evidence from Citizens Advice and the Energy Ombudsman about thousands of customer experiences.

A long-standing issue

Failings had been flagged to British Gas management through an external review in 2018 and an internal audit in 2021, both of which identified organisational performance deficiencies.

Remedial action was taken in response, but was inadequate, with improvements not sustained and sufficient action only following the start of Ofgem’s investigation.

“It is clear that British Gas fell short in its treatment of an unacceptable number of vulnerable customers who had a PPM installed without consent, and it’s right that they’ve taken action to put things right.

“Because of our action, customers will receive a substantial package of redress, compensation and debt write off,” said Tim Jarvis, CEO of Ofgem.

“The installation of prepayment meters under warrant should only be a last resort, with rigorous checks to ensure debt is recovered lawfully, proportionately and safely,” he added.

Customers due compensation will be contacted directly by British Gas and do not need to take any action, with payments either credited to accounts or paid out directly.

British Gas has been given a year to identify the exact number of households entitled to compensation, since the investigation focused on a sample of customers rather than the full affected population.

British Gas voluntarily suspended warrant-based prepayment meter installations in February 2023 when issues first emerged, ended its use of third-party contractors for field debt recovery, and has not restarted the practice.

The company said it has since strengthened governance and oversight, updated operational procedures, improved data and vulnerability identification, and introduced additional safeguards in line with Ofgem’s PPM Code of Practice.

British Gas said it will also obtain independent assurance of the changes made to its policies, processes and operational practices.

A separate Market Compliance Review by Ofgem assessed conduct across the wider energy sector on prepayment meter installations between 2022 and 2023, with eight suppliers paying a combined £73.6 million in compensation, debt write-off, and hardship payments.

The new Vulnerable Customers Debt Advisory Panel set up by British Gas as part of the settlement will run for 24 months and include independent experts.

Suppliers given permission to restart installations must follow strict conditions before a meter can be fitted without a billpayer’s consent, including at least 10 attempts to contact a customer, a site welfare visit, and a ban on installations in homes with someone aged over 75, under 2, or where a resident relies on a continuous energy supply for health reasons.

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