The energy regulator has ordered Octopus Energy to pay £1.5m in refunds and compensation, after an investigation found thousands of errors on prepayment meter bills.
An investigation by Ofgem found Octopus failed to issue final bills to 34,000 prepayment customers who transferred to another supplier or terminated their contract within the required six-week period between 2014 and October 2023.
Octopus has agreed to pay £1.25m in compensation to affected customers, and refund £231,000 in credit that was remaining on accounts when they were closed. The average sum paid for each affected customer was £43, Ofgem said.
Ben Martin, the director for consumer protection and competition at Ofgem, said it was important that customers receive final bills in line with its rules “so they are aware of any credit remaining on their accounts and can reclaim it”.
“This is particularly important for prepayment meter customers who are more likely to be in financial difficulty,” he said. “We will continue to closely monitor compliance with our billing rules, and drive improvements in the sector so customers can expect the highest standards of service from their energy supplier.”
The regulator first identified the problem after another energy provider, E.ON Next, self-reported the same error to Ofgem.
Octopus said the regulator had “spent two years investigating an alleged issue with prepayment meter bills that had zero customer complaints”.
The company – Britain’s largest household energy supplier – disputed the idea that prepayment customers must receive a final bill when moving out, arguing it is “impossible to implement in most cases”.
Octopus said 60% of its prepayment customers do not notify the company when they move and many energy suppliers “rely on slow and unreliable traditional prepayment industry systems for final billing”. Octopus added that it only has bank account details for 10% of prepay customers, while 70% of refund cheques go uncashed because of a lack of forwarding addresses.
Octopus said that instead of following Ofgem’s final bill mandate, it charges its prepay customers about £70 below the price cap.
after newsletter promotion
The energy provider claimed that under Ofgem’s rules, only about 16% of prepay customers would actually receive a final statement and any due credit refund.
Rachel Fletcher, the director of economics and regulation at Octopus Energy, said: “Octopus has always been focused on doing the right thing for customers and thinking outside the box to deliver good outcomes for customers despite imperfect industry systems and data.
“With energy costs soaring, we’d like to see Ofgem put people over policies. People want lower bills. We’d like to see Ofgem focusing its efforts on delivering that.”
