E.On to pay £1.7m in compensation over exit fees

Energy company E.On has apologised and agreed to pay £1.7m in compensation after it overcharged 94,000 customers following price rises.

Some £1.4m is being paid directly to customers who were overcharged on exit fees. They will receive an average rebate of £14.83 each.

The other £300,000 will be paid into a hardship fund run by charity Age UK.

E.On made errors during a 30-day window that allows customers to switch supplier before a price rise.

During that time, industry rules mean customers on fixed-term deals should not incur an exit fee if they signal their intention to switch supplier.

If they make this intention clear, they should also avoid any higher prices if the switch happens after the price rise comes into effect.

'Positive step'

Regulator Ofgem said that the compensation related to four price rises that occurred between 2008 and 2011. E.On is the only one of the big six energy companies not to have announced a price rise for residential customers so far this autumn.

Ofgem said that E.On brought the error to its attention in November and had agreed to compensate customers rather than face an investigation and a potential fine.

Customers who were overcharged have been identified by E.On, the regulator said, and should receive a cheque with their rebate by the end of January. They do not need to contact the energy company.

An Ofgem spokesman said that if it emerged that not all former customers could be sent rebates, their refunds would be added to the hardship fund instead.

The payment includes an 8% interest payment on the amount that they were incorrectly charged.

"Ofgem has put in place protections for consumers so they can get a fair warning if their supplier puts up prices and time to shop around for a better deal," said Sarah Harrison, of Ofgem.

"E.On has accepted it failed to meet these protections. This announcement that E.On will compensate customers is a positive step by the company to put right their mistakes and is welcome."

Rule change call

E.On has apologised and said that the error would not happen again.

"We are very sorry to have let down some of our former customers and have made clear that we will refund the money plus interest. Our systems are being updated," said David Bird, customer service director at E.On UK.

"We have been open in our failure with the energy regulator, Ofgem, and are pleased to have agreed with them how we can put this right and have identified all customers who are due to receive payment from us in January."

Audrey Gallacher, director of energy at watchdog Consumer Focus, said: "This agreement sends a welcome message to the energy industry that not sticking to the rules has repercussions.

"It is positive that E.On worked with the regulator to get this money back to customers who lost out, rather than paying a fine which would go back to the Treasury.

"We want to see new powers for Ofgem to require fines to be paid back to energy customers brought into force as soon as possible, to ensure people can be directly compensated if they lose out when things go wrong."