Energy firm E.ON to pay £7.75m penalty for overcharging

E.ON is to hand �7.75m to Citizens Advice after again being found to have overcharged customers.

E.ON is to hand �7.75m to Citizens Advice after again being found to have overcharged customers. - Credit: NewsCast

E.ON is to hand £7.75million to Citizens Advice after the energy company was found to have overcharged customers in the wake of price rises.

The package of help for vulnerable customers is in addition to the £400,000 E.ON has already paid back to potentially affected customers.

Regulator Ofgem said the penalty reflected E.ON’s “repeated failing” on billing rules after the company incorrectly imposed exit fees and overcharged customers following price rises in January 2013 and January 2014.

The regulator said E.ON’s errors meant customers who took the chance to switch suppliers after the bill rises were wrongly charged.

Companies are not supposed to apply exit fees if a customer signals their intention to move supplier within the standard 30-day notice period of a price rise. This is the case even if the switch occurs after the price rise.

Sarah Harrison, Ofgem’s senior partner in charge of enforcement, said: “Ofgem’s rules give customers a chance to avoid exit fees and higher costs when suppliers put up prices.

“These are important customer protections and it is vital that suppliers play by the rules so customers are encouraged to engage in the market.”

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In November 2012, E.ON paid a £1.7m package for incorrectly charging exit fees or overcharging customers following price rises.

Ms Harrison said: “It’s absolutely unacceptable that E.ON failed to provide these vital customer protections yet again and this persistent failure is the reason for the high penalty.”

The errors in respect of price rises in January 2013 and January 2014 affected direct debit and standard credit customers. The average amount paid back was around £8 and £12 respectively.

E.ON’s error also resulted in around 500 prepayment customers for the January 2013 price increase and around 6,500 for the January 2014 increase missing out on an average refund of £3.42.

E.ON is tracking down these customers to provide refunds by the end of April.

Germany-based E.ON’s UK operation includes the retail business of the former Eastern Electricity company which, through a string of takeovers and acquisitions following privatisation, became part of TXU Energi which was acquired in 2002 by Powergen, as E.ON’s UK subsidiary was then known.

E.ON withdrew from the Eastern Electricity offices at Wherstead, near Ipswich, in 2008 with the loss of about 300 jobs, the site subsequently being purchased by the East of England Co-operative Society.

However, although E.ON no longer has any physical presence in the region, any former Eastern customers who have never taken the opportunity to switch supplier will still be served by E.ON by default.