Octopus Energy, now the UK’s largest energy supplier, has been ordered to pay nearly £1.5 million in refunds and compensation to thousands of former prepayment meter customers. This comes after the regulator, Ofgem, found that Octopus failed to issue final bills within the required six-week period, leaving many customers unaware of credit balances owed to them. The issue, which spanned from 2016 to October 2023, affected over 34,000 customers and has put a spotlight on the importance of regulatory compliance in the energy sector.
Prepayment Meter Customers
Prepayment meters are commonly used by some of the UK’s most financially vulnerable households. Unlike traditional billing, customers pay for energy in advance and top up as needed. This system allows for greater control over spending but can also leave customers exposed if processes are not followed correctly. Ofgem’s investigation revealed that Octopus Energy did not send final bills to the majority of these customers after they left the supplier, as required under Standard Licensing Condition 27.17.
Without a final bill, many customers were left in the dark about any outstanding credit on their accounts. While balances are visible on the meter, a final bill provides official notification and is necessary for customers to reclaim any money owed. Ofgem’s director for consumer protection, Beth Martin, emphasised the importance of this process, especially for prepayment customers who are more likely to be in financial difficulty.
Breaking Down the Compensation
Octopus Energy’s compensation package totals £1.483 million, with an average payment of £43 per affected customer. This sum includes £231,000 in refunds for remaining account credit and £1.25 million in direct compensation. The company also agreed to write off the debt of customers who left during the period of non-compliance.
| Category | Amount |
|---|---|
| Credit Balance Refunds | £231,000 |
| GSOP Compensation | £1,040,000 |
| Additional Redress | £212,000 |
| Total | £1,483,000 |
The payments are designed to address both the financial impact and the inconvenience caused by not receiving timely final bills. Where Octopus was unable to trace customers, payments were made to the Energy Industry Voluntary Redress Fund, which supports vulnerable energy consumers.
Ofgem’s Rationale and Broader Context
Ofgem’s rules are clear: energy suppliers must issue final bills within six weeks of a customer leaving. This ensures transparency and allows customers to reclaim any credit. The regulator’s intervention followed a self-report by another supplier, E.ON Next, which prompted a wider review of industry practices.
Beth Martin stated, “It’s important that customers receive final bills in accordance with our rules, so they are aware of any credit remaining on their accounts and can reclaim it. This is particularly important for prepayment meter customers who are more likely to be in financial difficulty”.
The case is part of a broader push by Ofgem to enforce compliance and protect consumers, especially those using prepayment meters. Earlier in 2025, Ofgem secured £7 million in compensation from ten suppliers for overcharging errors, highlighting the regulator’s commitment to holding companies accountable.
Octopus Energy’s Response
Octopus Energy has accepted Ofgem’s findings and complied with the compensation order. The company has updated its billing processes and systems to ensure final bills are now sent in line with regulations. Octopus also highlighted the practical challenges of issuing final bills to prepayment customers, noting that 60% do not notify the supplier when moving and that most use up their remaining credit or leave it for the next tenant.
Octopus’s leadership argued that the company’s practices have already delivered significant savings to vulnerable customers, and that the lack of customer complaints suggests the issue did not cause widespread harm. Nevertheless, Octopus has agreed to Ofgem’s demands and stressed its ongoing commitment to customer care and regulatory compliance.
What Customers Need to Know
If you were a prepayment meter customer with Octopus Energy between 2016 and October 2023 and did not receive a final bill, you may be eligible for compensation. Affected customers should be contacted directly by Octopus. If you believe you are entitled to a refund or compensation but have not heard from the supplier, you can contact Octopus Energy’s customer service for assistance.
Ofgem’s guidelines ensure that customers are compensated automatically for breaches of minimum service standards. For missed appointments or delays in switching suppliers, the standard compensation is £30 to £40, with additional payments if compensation is not paid promptly. These rules are designed to protect consumers and ensure energy companies deliver the service they promise.
Protecting Vulnerable Consumers
This case highlights the ongoing challenges faced by prepayment meter customers in the UK. Ofgem recognises that these households are often more vulnerable and less able to advocate for themselves. The regulator’s intervention demonstrates a commitment to protecting these customers and ensuring fair treatment across the energy market.
The compensation order also sends a message to all energy suppliers that regulatory compliance is not optional. Ofgem will continue to monitor the industry closely and take action where necessary to uphold consumer rights.
Industry Lessons and Customer Rights
Octopus Energy’s experience serves as a cautionary tale for the entire energy sector. As more households turn to prepayment meters, especially during periods of economic uncertainty, the need for robust processes and clear communication becomes even more critical.
For customers, the message is clear: know your rights and do not hesitate to seek redress if you believe your supplier has failed to meet its obligations. Ofgem’s compensation rules are there to protect you, and recent actions show that the regulator is willing to enforce them.
