The energy company E.ON will pay £7.75m to the Citizens Advice Energy Best Deal Extra project after the energy watchdog Ofgem found the firm had been incorrectly applying price rises and termination fees to some former customers.
In a statement, Ofgem said E.ON had made billing errors in respect of price rises in January 2013 and January 2014. It said the company had paid back about £400,000 to 40,000 customers who might have been affected, although Ofgem made it clear that the number of customers actually affected was "likely to be significantly less". E.ON also charged exit fees to customers who switched to different providers in a way that did not comply with Ofgem rules.
Rather than contest the charges, E.ON decided to accept them and negotiated a payment of £7.75m to the charity’s project, which will be made within the next few weeks.
The Ofgem statement says that the amount of money reflected the fact that E.ON had made the same error before, but also that it had notified Ofgem of the billing issues and complied throughout the investigation.
Citizens Advice launched Energy Best Deal in 2008, with support from Ofgem and annual financial support from major energy firms.
The initiative attempts to inform people across England, Wales and Scotland about the savings that can be made by switching fuel providers, give them information about energy efficiency and energy saving, and advice about the help that is available to people who struggle to pay their bills.
The Energy Best Deal Extra project provides one-on-one advice to people who are referred from regular Energy Best Deal group sessions. It has received a total of £12m in various one-off grants from energy firms since 2010, including other penalty payments from firms such as Scottish Power and UK Power Networks.
Gillian Guy, chief executive of Citizens Advice, said: "It is positive that the Ofgem penalty will go towards helping people who are struggling to heat and light their homes. It is also encouraging that E.ON owned up to the problem and is both providing direct redress and taking steps to make sure this doesn’t happen again. Consumers must be confident that the regulator will take strong action when companies fail, so this judgment is welcome news."
An E.ON statement said: "E.ON is committed to ensuring that no one will lose out financially and is pleased that the payment is going to a worthwhile cause that will provide support to those in need."