British Gas has agreed to pay £20m into the energy regulator Ofgem’s voluntary redress fund, following an investigation into the company’s installation of prepayment meters.

The investigation followed issues identified in 2023, covering activity between February 2018 and February 2023, and was resolved with the regulator through alternative action.

Ofgem has now closed its investigation into British Gas on its treatment of customers who had a prepayment meter installed without their permission, with affected consumers set to benefit from the settlement agreement made with the regulator.

The investigation concluded that British Gas “failed to meet the standards required of an energy supplier” when installing prepayment meters, Ofgem said, and that it had breached licence conditions specifically designed to protect customers in vulnerable situations.

Ofgem CEO, Tim Jarvis, commented: “It is clear that British Gas fell short in its treatment of an unacceptable number of vulnerable customers who had a prepayment meter installed without consent, and it’s right that they’ve taken action to put things right.

“Because of our action customers will receive a substantial package of redress, compensation and debt write off.”

In addition to the £20m voluntary redress payment, British Gas has agreed to a settlement package which includes compensation to affected customers in the period between 2018 and 2021. These payments are in addition to the compensation British Gas had already proactively paid to affected customers covering 2022 to 2023.

British Gas will also write off £70m of energy debt for vulnerable customers in accordance with a framework agreed by Ofgem, a proportion of which may be used as compensation for some customers. The energy company will also continue to provide the remainder of a £22.4m voluntary support package launched in 2023, aimed specifically at supporting its prepayment meter customers.

“What happened should never have happened, and I am sorry to the prepayment customers who were affected,” chief executive at Centrica, the parent company of British Gas, Chris O’Shea, said.

“Over the last three years, we have treated this matter with the seriousness it deserves and have made changes to our practices and put safeguards in place to ensure we deliver the standards our customers have every right to expect.

“Providing help to those who need it most has always been a core part of what we do at British Gas, and this issue has been deeply felt by the many thousands of colleagues who work hard every day to do the right thing for our customers.”

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