Ofgem said a system error meant the UK’s largest supplier of gas and electricity charged 94,211 customers its more expensive standard variable tariff rate after they decided to switch to a new supplier.
The watchdog also found that British Gas wrongly informed 2.5 million customers that exit fees were chargeable during the 49-day switching window – incorrectly charging fees to almost 1,700 fixed-deal customers.
It said that before the conclusion of its investigation the company had refunded all customers overcharged by more than £1 – paying more than £500,000 in total compensation.
Those who were incorrectly charged exit fees received £245,000 while the bulk of the £2.65m payout, £1.1m, was paid to Ofgem’s consumer redress fund.
News of the compensation is another PR blow for British Gas following a backlash against the company’s decision to impose a second rise in household bills this year.
It has insisted the increases are fair and based on rising wholesale energy costs.
Anthony Pygram, director of conduct and enforcement at Ofgem, said of its inquiry: “British Gas failed its customers who were coming to the end of their fixed contracts and switched supplier by unfairly penalising them and applying charges in error.
“Many more customers could have been deterred from getting a better deal due to the incorrect terms and conditions.”
He added: “Our enforcement action against British Gas sends a strong message to all suppliers that they must respect their customers’ rights during the switching window and always treat customers fairly.”
A company spokesperson responded: “A system error led to a small proportion of customers being incorrectly charged.
“We’ve apologised to the customers affected. Those who were charged too much were promptly refunded as soon as we identified the issue and were paid an additional goodwill gesture.”
Some customers were provided with initial communications containing incorrect terms and conditions – but all other communications they received were correct.
“We note Ofgem has acknowledged that we have already addressed this issue and that we have changed our processes to ensure the error has been corrected.”