Octopus Energy Ofgem compensation: Firm fined £1.5m over thousands of bill errors, says new billing rules "impossible"
Octopus Energy has said it is “impossible” to fully comply with new rules from Ofgem that require energy companies to issue final bills to prepayment customers when they move out.
The energy firm made the statement after agreeing to pay £1.5 million into a redress fund, as part of a settlement with Ofgem following a two-year investigation. The regulator had found that Octopus had failed to send final bills to some prepayment meter customers and instructed the firm to both make the payments and update its billing processes.
Octopus confirmed it has now fulfilled both requirements. However, the company strongly criticised the feasibility of Ofgem’s broader expectations.
In a press release, Octopus said: “Ofgem’s ruling that prepayment customers must receive a final bill upon moving out – while sensible in principle – is impossible to implement in most cases.”
The company cited internal data showing that 60% of prepay customers do not inform them when they move, and only 2% actively contact the company about receiving a final bill. Octopus also noted that it only holds bank details for 10% of prepay customers, and that 70% of refund cheques go uncashed due to the absence of forwarding addresses.
The company argued the existing prepayment infrastructure relies on “slow and unreliable traditional prepayment industry systems” that cannot support accurate and timely final billing. It added that the key billing data is typically held on the physical meter or customer’s top-up card, rather than in a central system.
Instead of pursuing what it calls an “unrealistic” approach, Octopus said it has taken alternative steps that leave customers financially better off. These include charging prepay customers around £70 below the price cap - a policy it claims has saved households over £7 million.
Octopus added that it typically leaves any remaining credit on the meter for incoming tenants, while writing off any debt if contacted by the new occupant - an informal but customer-friendly practice that differs from the rigid billing approach favoured by the regulator.
“Octopus has focused on the things that matter for customers – keeping their bills down – not issuing a final bill that might be wrong and not chasing small amounts of debt from often vulnerable customers,” the company said.
Rachel Fletcher, Director of Economics and Regulation at Octopus, added: “Octopus has always been focused on doing the right thing for customers and thinking outside the box to deliver good outcomes for customers despite imperfect industry systems and data. With energy costs soaring, we’d like to see Ofgem put people over policies. People want lower bills. We’d like to see Ofgem focusing its efforts on delivering that.”