Energy firms paying out £25 million a year to customers for ‘breaking rules’

Energy companies in the UK have paid out £152 million over the past six years for failing to meet licence conditions, industry regulator Ofgem has revealed. Averaging £25 million a year since 2018, this money has been used to support vulnerable customers and fund initiatives promoting energy efficiency and net-zero policies.

These funds come from payments and fines levied against companies for various infractions, which are then channeled through the Energy Redress Scheme.

These infractions include issues such as inaccurate billing, subpar customer service, and manipulation of wholesale energy markets. Since 2018, the scheme has supported 647 projects aimed at assisting vulnerable consumers, offering energy-saving advice, and furthering the development of net-zero strategies.

Recent examples of companies contributing to the scheme include Ovo Energy, which paid £2 million for mishandling customer complaints, and Beatrice Offshore Windfarm Limited, which paid £33.14 million for breaching energy market regulations.

This substantial sum highlights the potential financial consequences for companies that fail to comply with Ofgem's rules. The redress scheme ensures that these funds are used to benefit consumers and promote positive change within the energy sector.

Ofgem said more than £55 million had been allocated to fuel voucher projects, providing help to vulnerable customers at risk of disconnection from their energy supply.

Cathryn Scott, director for market oversight and enforcement at Ofgem, said: "Protecting customers and ensuring they're treated fairly is at the heart of Ofgem's mission.

"That's why we make sure that when energy companies break the rules, they make amends by contributing to projects that make our energy system fairer and support those in need.

"£152 million is a huge sum of money and has helped thousands of people all over the country struggling with bills, as well as contributing to projects that help people decarbonise and learn more about their energy consumption.

"Ofgem's enforcement function is a powerful weapon in our regulatory arsenal, evidenced by the more than £92 million in compensation to customers, redress payments and fines successfully handed out in 2024 alone.

"The latest milestone of securing £150 million in redress payments for good causes could not have happened without the thorough investigative work of our compliance and enforcement teams or the Energy Saving Trust who ensure the money is targeted to reach those in need."

The Citizens Advice Energyworks project in Brighton and Hove was recently awarded almost £528,000 by the scheme to help all city residents in fuel poverty with free and impartial energy advice.

At the end of last year, research showed that more than 16,000 households in Brighton and Hove were living in fuel poverty, Ofgem said.