Shell fined £536k for overcharging retail energy customers

·3-min read
Logos are seen on the windows of the Shell Centre in London February 4, 2010. Royal Dutch Shell Plc said it planned even deeper cuts to its oil refining and retail operations after downstream weakness caused a 75 percent fall in fourth-quarter profits to $1.18 billion (743.87 million pounds). REUTERS/Luke MacGregor (BRITAIN - Tags: BUSINESS ENERGY)
Shell energy has been ordered to pay back thousands of customers after Ofgem found it had overcharged on its default tariffs. Reuters/Luke MacGregor.

Shell energy has been ordered to pay back thousands of customers after Ofgem found it had overcharged on its default tariffs.

On Thursday, the UK's market regulator Ofgem announced that Shell Plc's (SHEL.L) must pay back £536,970 pounds after overcharging on its tariffs.

A total of £106,000 in refunds will be issued automatically to affected customers and those with prepayment meters will see the cash added as a credit on their meter.

The supplier has also been ordered to pay £400,000 to Ofgem’s voluntary consumer redress fund and £30,970 in goodwill payments to affected customers.

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In total, Shell Energy Retail Limited is to refund and compensate 11,275 prepayment customer accounts.

The UK consumer gas, electricity and broadband operations business had been overcharging prepayment customers for over three years from January 2019.

Ofgem said the overcharging of customers was due to operational errors related to the implementation of its default tariffs.

In March 2022, Shell discovered that many meters failed to update to a revised rate that was in line with changes in the level of the price cap.

This caused customers to pay above the rate allowed under the price cap in the time period between January 2019 and September 2022.

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In a statement released today Ofgem said: "Tariff updates were sent to prepayment meters to amend rates in response to changes in the level of the price cap, but due to a variety of operational issues, not all meters were successfully updated to the revised rates.

"The result of this issue was that over 11,000 prepayment customers paid above the rates allowed under the price cap at the time.

"The average amount being refunded to affected customers is £9.40."

Ofgem sets a price cap on the amount Britain's energy suppliers are able to charge customers.

The current Ofgem price cap came into force on 1 April 2022.

For those on default tariffs that pay by direct debit the cap is set at £1,971 per year, and for prepayment customers, the price cap is set at £2,017.

Ofgem said it had decided not to take formal enforcement action against Shell Energy as the company had self-reported the overcharging issue.

Concerning overcharging of customers amid a cost of living crisis, 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.”

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