Business retailer fined for deliberate overcharging

United Gas & Power (UGP) has been hit with a £2.1 million financial penalty for multiple breaches of its standard licence conditions (SLCs).

A two-year investigation by Ofgem concluded that UGP deliberately overcharged customers, did not return credit balances owed to former customers and repeatedly failed to properly communicate at time of contract renewal.

In total, the non-domestic market energy supplier has been found to have breached nine SLCs over a five-year period from 2016.

Ofgem has now issued UGP, which serves around 2,700 customers, with a nominal fine of £1 and a penalty of £2.1 million to be paid into the regulator’s Voluntary Redress Fund.

Cathryn Scott, director of enforcement and emerging issues at Ofgem, said: “UGP’s behaviour was unacceptable. No matter what financial difficulties companies may find themselves in, it is plainly unjustifiable and wholly unacceptable to deliberately overcharge customers to boost revenue.

“In addition to this overcharging, it is concerning that UGP failed to return credit owing to former customers and retained such large sums in their own account; only refunding customers following Ofgem’s intervention.

“These are very difficult times for businesses and energy consumers. This significant penalty should send a strong signal to all suppliers in the market to act with the utmost care and integrity when it comes to customers’ money.”

Ofgem found that despite having actual consumption data available, UGP billed some customers on inflated consumption estimates, generating extra revenue for itself to remedy a shortfall in its budget. The average customer was overcharged by more than £2,000, with one customer overcharged by more than £22,000. Ofgem’s investigation found that often overpayments were not returned as promptly as they could have been, with some customers not receiving their money back for up to seven months after it was taken from them.

The investigation also found UPG to be in breach of SLCs in relation to handling of credit balances on former customers’ accounts, whereby credits owing to customers were not returned promptly or at all. Ofgem found that UGP amassed just shy of £250,000 in credit balances from its microbusiness consumers (MBCs). UGP has now returned just over half this money, but some former customers cannot be located.

In addition to the breaches relating to billing, UGP also breached SLCs relating to the proper identification of MBCs. This led to many of the customers affected not being afforded the relevant additional protections MBCs receive.

Furthermore, UGP also breached conditions relating to the provision of important information at the time of contract renewal, leaving many MBCs without the required information to make informed switching choices and take advantage of other deals available.

A UGP spokesperson said: “We accept responsibility for the breaches identified and apologise to our customers for any inconvenience or concern caused.

“During the period between 2016 and 2022, the investigation found that we breached rules around billing, meter reading, and communications, resulting in a financial penalty. We have taken this matter very seriously and have been working closely with Ofgem to address the issues raised.”

The spokesperson added that several measures have been put in place to ensure similar breaches do not occur in the future. This includes replacing its billing system with “a new and improved system”.

Additionally, UPG has vowed that it will be “updating its compliance culture and training, and reviewing and updating our Treating Customers Fairly statement, renewal letters, principal terms, and terms and conditions to provide greater clarity and transparency to our customers”.

Earlier this week Ofgem’s chief executive Jonathan Brearley revealed he has written to chancellor Jeremy Hunt, as well as to the energy security minister Grant Shapps, to update them on Ofgem’s review into the non-domestic energy supply market.

While he acknowledges that large parts of the market are showing signs of recovery from a “challenging period” of soaring and volatile energy prices, the regulator’s evidence so far suggests there remain areas of “significant concern”. Specifically, Ofgem is investigating potential breaches by some non-domestic suppliers in relation to their compliance with the Energy Bill Relief Scheme (EBRS).

The regulator has also said it will be engaging with some suppliers over “unexplained and significant price increases” in relation to their non-domestic customers.