As many as 1.5 million households with prepaid gas meters have been overcharged because of a fault in the way their meters calculated their usage.

According to a statement released by industry body Energy UK today, a problem with a meter installed by a wide range of energy suppliers has led to customers paying an average of £15 more year for their gas than they should have.

The trade association said the meters have been in use since 2007, and that in the "worst case scenario" customers could have paid £110 more for their gas than they should have. (See our Cheap Energy Club to see if you could save by switching supplier.)

Prepaid meters use a calorific value (CV) code to calculate the amount of gas that is used. In the meters affected, the CV was not correctly set and this resulted in it appearing that more energy had been used than was the case.

Energy suppliers are contacting customers with the faulty meter settings to arrange a refund, and Energy UK says the fault will be rectified electronically. It says engineer visits will not be necessary to solve the problem, and that the first refunds should be paid before Christmas.

Archna Luthra, energy analyst at MoneySavingExpert, says: "This is simply not good enough. Suppliers need to urgently pay back cash that does not belong to them, plus interest, and provide a clear and easy process for people to claim money back.  Prepay users are often some of the most vulnerable in society and are already paying some of the highest prices in the energy market.

"Energy UK has not set out how users that have moved house or switched away from prepaid meters will get what’s rightfully theirs. This is the latest in a string of blunders that energy firms have made – a massive overhaul of the energy market needs to take place to ensure people are not footing the bill for suppliers’ sloppy processes."

What should I do?

Energy UK says you do not need to do anything – if you are affected, your supplier will contact you as suppliers are aware of all customers who have the meters.

In some cases energy companies have already been in touch with customers, but if not, they will contact you over the coming months to arrange a refund.

MoneySavingExpert is contacting the big six energy suppliers to ask for their procedures and timescales for refunding customers. Here are the responses we've had so far – we will update this news story as soon as we have more information.

  • British Gas says it will contact all affected former and existing customers via phone, email and post to offer a refund. It's still working out how this refund will be given, but it is hoping it will be in cash. It says vulnerable customers such as the elderly or disabled will get a refund by the end of this year, while everyone else will get a refund early next year. Existing customers will have their meters fixed under the same time frames, while former customers will have meters fixed by their new supplier.

  • EDF is posting all affected existing customers a letter with a barcode on. When customers take this letter to a Post Office branch alongside two forms of ID, the barcode will be scanned and customers will be given a cash refund. Refunds will include interest as well as an estimated payment to cover the period until March 2015. Meters should be fixed by mid-2015 and where they're not fixed by the end of March, affected customers will be given a second rebate. EDF is also trying to trace former customers to offer them a refund, so get in touch with its customer services team if you've since left the firm but think you're affected. Unclaimed refunds will be donated to EDF's Energy Trust charity.

  • Eon says it will start to contact all affected customers and offer them a refund before Christmas. The process will be finished in spring. Refunds will be given via cheque or in the form of a voucher and the firm is also trying to track down former customers. Eon says it expects all meters to be fixed within nine months.

  • Npower customers will all be written to and told if they're affected. Existing customers owed over £5 who aren't in energy debt will be sent a letter, which they'll then need to take to a Post Office branch alongside two forms of ID, where they'll be given a cash refund. Existing customers owed less than £5 who aren't in energy debt will have the cash credited to their account. Existing customers with debt on their account will have the amount owed applied to their meter. Npower says it will also be contacting former customers. It adds that refunds should be paid by the end of January and meters will be fixed at the same time.
  • SSE says it will contact affected existing customers by post and refunds will be provided as a voucher for an energy top-up. It doesn't have a specific end date for when refunds will be given but says these will be issued "as soon as possible". Again, there's no end date for when meters will be fixed by but SSE says it will take "a number of months". The firm adds that it is still finalising the process for former customers.

  • Scottish Power says incorrect meters will be updated remotely, while it will send a refund to anyone who is owed one. It adds that even where customers have overpaid, they'll see the correct account balance on their annual statement anyway and that they can request a refund of any credit at any time. It says customers who have left Scottish Power will have been told about any outstanding credit on their account and refunded it at the time.

What does Energy UK say?

Angela Knight, chief executive of Energy UK, says: "Suppliers are working hard to roll out a solution for an issue which has affected some pre-payment gas meters. The meters were manufactured with a problem where they over-collected from customers. However, the companies know who is affected and will be getting in touch directly to put the meters right and refund any money owed.

"The suppliers and the wider industry are all very sorry this problem has occurred but are already getting in contact with customers. Customers do not need to do anything – their supplier will get in touch but, if they are concerned, they just need to contact their energy company who will be able to help." 

Additional reporting by Helen Knapman.