Ofgem fine Shell after over 3 years of overcharging customers for energy

Watchdog orders Shell Energy to automatically refund thousands of customers after overcharging them.

The retail arm of Shell PLC (LSE:SHEL, NYSE:SHEL) was fined more than £500,000 by Ofgem, the UK’s energy regulator, for charging 11,275 customers more than the price cap.

Shell Energy Retail, which supplies gas, electricity and broadband, was fined £536,970 after it overcharged prepayment customers for what it claimed to be “operational errors” these so-called operational errors continued for periods of time between January 2019 and September 2022.

The error comes as millions of households face being plunged into poverty amid soaring energy bills and a wider cost-of-living crisis.

Refunds will be issued automatically to affected customers, Ofgem said in a statement today.

Tariff updates were sent to prepayment meters to amend rates in response to changes in the level of the price cap, but due to a variety of operational issues, not all meters were successfully updated to the revised rates.

This meant over 11,000 prepayment customers paid above the rates allowed under the price cap at the time.

This is not the first time Shell Energy Retail has overcharged customers, with the supplier agreeing in 2019 to refund and compensate 12,000 customer accounts it overcharged when the price cap was introduced.

It was trading as First Utility at the time of the breach.

However, whilst this issue represents a serious matter, taking into account that Shell Energy Retail Limited self-reported the issue and has put in place steps to address the failings,

However, Ofgem has decided not to take formal enforcement action, as the supplier self-reported the issue and has put in steps to address the failings.

Neil Lawrence, Director of Retail, Ofgem said “Ofgem expects suppliers to adhere to the terms of contracts they have with customers, particularly ensuring they pay no more than the level of the price cap. Households across Britain are already struggling with rising energy bills and living costs. Overcharging by suppliers can cause additional and unnecessary stress and worry at what is already a very challenging time for consumers across the UK

Ofgem is always prepared to work with suppliers who have failed to comply with their obligations, but who have self-reported and are determined to put things right, as Shell has done here. The contributions Shell has made to the redress fund will help to support vulnerable consumers with their energy bills.”

The developments come ahead of an expected announcement of a vast hike in the consumer price cap tomorrow to £3,500 per year, with energy bosses rallying around the idea of a price cap freeze to ease suffering this winter.

The price cap will also be updated quarterly, raising the prospect of two increases in the mechanism this winter.

This year Shell posted record quarterly earnings of US$9.1bfn in the first quarter and topped this with US$11.5bn in the second.

According to some experts, energy bills could rocket to more than £6,500 in April, in the most severe forecast yet for household bills.

Revising their previous estimate of £6,089 upwards, consultancy Auxilione claimed that, following a spike in gas prices on Monday, regulator Ofgem’s price cap could rise to £6,552 in April. The firm also forecast that the cap could be upped to £5,066

In view of this overcharge, it would be good advice to constantly check bills and not just accept tarifis are correct. It is clear that even though energy giants are making vast profits, investment into good practice is falling short, this has taken nearly three years to come to light.  Good practices to run smoothly and within the law should not rely on compalcancy. This was a three-year overcharge to the most vulnerable customers, all on extortionate prepayment meters.