Npower and E.on have apologised and paid out for misleading customers after a MoneySavingExpert.com investigation revealed many customers with fixed tariffs ending were wrongly told they'd have to pay to switch provider.
Npower has written to 22,000 customers after regulator Ofgem found that the firm wrongly told them they faced exit fees if they tried to switch suppliers during the last 49 days of their fixed contracts.
If you're in the last 49 days of your fixed deal, Ofgem's rules mean that you don't have to pay an exit fee and can switch to a different provider without paying anything.
Meanwhile, E.on has also apologised and paid out £21,000 after it wrongly told 450 customers they faced switching fees.
The energy watchdog opened an investigation into the companies after MoneySavingExpert presented it with evidence of the incorrect information being given to customers, with some wrongly told they'd have to pay up to £60 to switch suppliers.
Ofgem is separately examining whether British Gas breached the conditions of its licence over its switching policies, following MSE's exit fee findings.
To see if you can switch and save about £300/year on your energy bills, use our free Cheap Energy Club.
Get Our Free Money Tips Email!
Martin: 'Customers' trust comes from being trustworthy'
Martin Lewis, founder of MoneySavingExpert.com, said: "The rules are simple. Energy firms cannot charge exit penalties in the last 49 days of a fixed tariff. We have reported many examples of providers misleading customers about this, with incorrect literature. This puts people off switching and therefore often results in them paying far more than they should.
"It's good to see the regulator dealing with the first of these Npower and E.on and I wait to see how it'll deal with British Gas, which has done similar. This should be seen as a shot across energy firms' bows they cannot be allowed to pervert the market this way. If it happens again, full-scale formal action and fines are needed.
"Energy firms often complain that their customers don't trust them. Trust doesn't come from improving your marketing, it comes from being trustworthy. This announcement is proof they have a long way to go to get there."
What did the firms do?
The watchdog found that between June 2016 and February 2017, Npower sent 22,000 customers a letter telling them they would incur exit fees if they changed suppliers during the 49-day 'switching window'.
E.on call centre advisers were found to have wrongly told 450 customers between October 2013 and February 2017 that they would be charged exit fees if they switched during the switching window.
In both cases, Ofgem found that no customers had been wrongly charged exit fees as a result of the misinformation.
E.on has since updated its call centre scripts and paid £21,000 redress to customers who cancelled or delayed switches as a result of the bogus information.
Npower has corrected the letter it sends to customers during the switching window, and in March paid compensation to four customers who'd cancelled switches having received an incorrect letter.
'It's essential suppliers get fundamental consumer protections right'
Anthony Pygram, Ofgem's partner for consumers and competition, said: "It's essential that all suppliers get fundamental consumer protections right, including the ability to switch without incurring exit fees during the switching window before a fixed deal ends. Not doing so risks delaying or even stopping customers from switching.
"Npower and E.on have taken action to contact affected customers, to compensate them where appropriate and to make sure they give correct information in future.
"We are grateful to MoneySavingExpert.com for bringing these issues to our attention."
Ofgem said it has closed its 'compliance cases' into the two firms without taking formal enforcement action, as E.on and Npower have now taken steps to improve their performance and compensate customers who suffered direct financial loss due to the failures.
An Ofgem spokesperson said it could in future consider reopening any such cases if it gets any more evidence of customers being incorrectly told they would be charged for switching within the 49-day window.
An E.on spokesperson said: "We've identified and said sorry to 450 customers, across a three-year period, whom we incorrectly advised would face exit fees if they switched away from us during a period where they were protected from such charges due to Ofgem regulations. We've worked with Ofgem to ensure we have taken the correct steps to put this mistake right and have paid a total of £21,000 to the affected customers as compensation for our error."
An Npower spokesperson said: "We're sorry that between June 2016 and February this year, we wrote to some customers incorrectly stating they would be charged an exit fee. No customers were actually charged a fee."
What ARE the rules?
The regulator's rules on penalty-free switching are extremely clear if you're in the last 49 days of your fixed deal, you DON'T have to pay an exit fee and can switch to a different provider without paying anything.
You can actually apply to switch at any point during a fixed-term contract without having to pay exit fees, as long as the switch is completed during the switching window.
However, it's best to apply within the switching window, as you can't set an exact date for the switch to complete and if it completes before the window opens you could still be charged fees.
What's the timeline of this investigation?
Despite the rules on penalty-free switching, at the end of 2016 and start of 2017 we found evidence that customers were being given duff info by various energy suppliers.
Here's how the timeline panned out:
- Dec 2016. We revealed British Gas and Npower had wrongly told some customers they'd have to pay exit fees of up to £60. British Gas's T&Cs for a collective fix wrongly stated customers would have to pay, without mentioning the 49-day penalty-free switching rule. It said it then "updated" its wording. Npower customers applying to switch within the last 49 days of their fix were sent confirmation emails telling them they'd have to pay exit fees it blamed a system error and said it would change its emails.
- Jan 2017. We received fresh complaints from customers of Npower, with some still being sent emails saying they'd have to pay to switch despite leaving within the switching window. Npower blamed an "error" within its system. An E.on customer also reported being wrongly told she'd be charged when calling the provider it apologised for what it called "an isolated incident".
- Mar 2017. MSE lodged a formal complaint with Ofgem and presented a dossier of evidence. We had further reports of Npower, British Gas and Extra Energy customers being given wrong info. Npower said it had stopped sending confirmation emails and was contacting customers who'd been given the wrong information, while British Gas and Extra Energy said customers wouldn't be charged.
- Jul 2017. Ofgem announced it was to investigate British Gas over its switching terms. Ofgem also said it was talking to Npower and E.on about exit fees but not investigating them.
- Sep 2017. We revealed that British Gas had charged a customer exit fees to switch tariff WITHIN the penalty-free switching window.