Regulator Ofgem found the energy giant charged 94,211 customers a more expensive standard variable tariff rate after they decided to switch to a new supplier, due to a system error. Customers were overcharged £782,450, according to Ofgem.

It also provided 2.5 million customers with incorrect terms and conditions, which stated that exit fees were payable during the 49 day period before their fixed deal expires, and incorrectly charged exit fees totalling £64,968 to 1,698 fixed deal customers.

A customer is entitled to switch at any time during or after this “switching window” without having to pay an exit fee.  The switching window is designed to encourage customers to switch to a better deal before they are rolled onto a default tariff at the end of their contract.

Ofgem opened an investigation in July 2017 following concerns raised by MoneySavingExpert.com.

Before the investigation concluded, British Gas refunded in full all customers who had been overcharged by more than £1 and paid £502,633 in compensation to them.

Following Ofgem’s findings, British Gas agreed to pay a further £244,770 in compensation to customers wrongly charged exit fees and the standard variable tariff and paid £1,050,229 into Ofgem’s consumer redress fund.

Anthony Pygram, director of conduct and enforcement at Ofgem, said: “British Gas failed its customers who were coming to the end of their fixed contracts and switched supplier by unfairly penalising them and applying charges in error. Many more customers could have been deterred from getting a better deal due to the incorrect terms and conditions.

“Ofgem put in place the switching window to help all customers switch before they are rolled onto their supplier’s expensive default rate.

“Our enforcement action against British Gas sends a strong message to all suppliers that they must respect their customers’ rights during the switching window and always treat customers fairly.”

‘We’ve apologised to customers’

A statement from British Gas parent company Centrica, said: “A system error led to a small proportion of customers being incorrectly charged. We’ve apologised to the customers affected. Those who were charged too much were promptly refunded as soon as we identified the issue and were paid an additional goodwill gesture.

“Some customers were provided with initial communications containing incorrect terms and conditions – but all other communications they received were correct.

“We note Ofgem has acknowledged that we have already addressed this issue and that we have changed our processes to ensure the error has been corrected.”