E.ON to Pay £14.5 Million Compensation After Prepayment Billing Failures
In a move aimed at rectifying significant billing errors, energy giant E.ON Next has been ordered by Ofgem, the UK’s energy regulator, to pay £14.5 million in compensation to nearly 250,000 prepayment customers. This follows an 18-month investigation into "unacceptable" failures in the company’s billing system that left many customers without refunds for account credits or overdue final bill payments.
The Billing Errors: What Went Wrong
The issues stemmed from E.ON Next’s prepayment customers who either switched suppliers or ended their contracts between early 2021 and late 2022. Due to errors in the company’s billing system, these customers failed to receive final bills within the required six-week period. This lapse left many unaware of leftover credit balances on their accounts, averaging £51 per affected customer.
To compound matters, E.ON Next failed to provide mandatory compensation payments of £30 or £60, which are legally required for such delays. About 100,000 of the affected accounts were in credit at the time, leaving customers frustrated and financially disadvantaged.
Beth Martin, Ofgem’s Director for Consumer Protection and Competition, expressed concern about the situation. “Prepayment meter customers are often among the most financially vulnerable. During a time of significant cost-of-living pressures, it’s unacceptable for customers to be denied refunds and compensation they are entitled to receive,” she stated.
Compensation and Debt Write-Off
E.ON Next has agreed to pay £14.5 million in total redress, distributed as follows:
- Credit Refunds: £4.7 million to reimburse affected customers for outstanding credit balances.
- Statutory Compensation: £6.6 million to account for unpaid compensation payments.
- Additional Compensation: £3.2 million to address the broader impact of the errors on customers.
Each affected customer will receive an average payment of £144. Additionally, the company has committed to writing off debts held by nearly 150,000 prepayment customers who closed their accounts during the 18-month period under review. This debt write-off aims to provide further relief to those who were adversely affected.
E.ON’s Apology and Commitment to Change
Chris Norbury, CEO of E.ON UK, issued a public apology to the affected customers, taking responsibility for the oversight and promising corrective action.
“We are deeply sorry to the customers impacted by this system issue. As soon as we became aware of the problem, we acted swiftly to notify Ofgem and have since implemented significant measures to prevent such issues in the future. Our priority is to ensure that we put things right for all our customers,” said Norbury.
The company emphasized that it has overhauled its internal systems to improve billing accuracy and customer service delivery. These changes, E.ON hopes, will rebuild consumer trust and prevent similar errors from occurring.
The Broader Context: Challenges for Prepayment Customers
Prepayment meter customers have long been recognized as a vulnerable segment of the energy market. Many are on low incomes, and the nature of prepayment systems exposes them to the risk of being left without electricity or gas if they cannot afford to top up their accounts. This situation is particularly concerning during the ongoing cost-of-living crisis, which has stretched household budgets to the limit.
Ofgem has responded to these vulnerabilities by temporarily banning the forced installation of prepayment meters earlier this year. The ban was introduced after reports emerged of energy companies pressuring customers into installing meters, sometimes without proper consent. However, certain providers, including EDF, Octopus, and Scottish Power, have since been allowed to resume installations under strict conditions. These include:
- Making at least 10 attempts to contact the customer before installing a prepayment meter.
- Providing £30 of credit to ease the customer’s transition.
Despite these measures, consumer advocates argue that more needs to be done to protect prepayment customers from exploitation and financial hardship.
E.ON’s Track Record and Industry Scrutiny
This is not the first time E.ON Next has come under regulatory scrutiny. In 2022, Ofgem fined the company £5 million for poor customer service. A review revealed severe shortcomings, including long call waiting times and high levels of unanswered calls, leaving customers feeling neglected and unsupported.
E.ON’s latest £14.5 million redress package highlights ongoing challenges in the energy sector, where prepayment customers often bear the brunt of systemic failures. The situation also sheds light on broader concerns about how energy companies prioritize profits over consumer welfare.
Government and Regulatory Action
The energy sector has been under increasing scrutiny for its treatment of vulnerable customers, with politicians and regulators alike calling for greater accountability. Ofgem’s intervention in the E.ON case is part of a broader effort to ensure energy providers meet their obligations and protect consumers.
Beth Martin highlighted the importance of the regulatory action: “This case reinforces the need for energy companies to focus on customer protection and transparency. While E.ON has taken steps to rectify the situation, the industry must do more to prevent such failures from happening in the first place.”
Future Outlook for E.ON and the Energy Industry
As the energy sector grapples with a shifting regulatory landscape and increasing consumer expectations, companies like E.ON face mounting pressure to improve their operations. The £14.5 million compensation package may serve as a wake-up call for other providers to prioritize customer satisfaction and compliance.
E.ON’s commitment to improving its systems and processes marks a step in the right direction, but the company—and the industry as a whole—has a long way to go in restoring consumer trust. With energy prices still high and economic uncertainty persisting, ensuring fair treatment for prepayment customers will remain a critical focus for regulators and consumer advocates alike.
