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Octopus Energy, one of the UK’s largest energy suppliers, has recently found itself in the spotlight after the energy regulator Ofgem ordered the company to pay nearly £1.5 million in refunds and compensation. This decision followed a review that revealed thousands of prepayment meter customers did not receive final bills within the required timeframe. The episode has reignited debate about customer rights, supplier responsibilities, and the evolving landscape of energy regulation in Britain.
Why Was Octopus Energy Ordered to Pay Compensation?
Between 2016 and October 2023, over 34,000 prepayment meter customers who left Octopus Energy did not receive their final bills within six weeks, as required by Ofgem’s rules. The failure to issue timely final bills meant many customers were unaware of any credit remaining on their accounts and missed out on refunds they were entitled to receive. Ofgem’s investigation found that this lapse particularly affected vulnerable customers, who often rely on prepayment meters and may be less able to advocate for themselves within the energy market.
The Scale and Structure of the Compensation
Octopus Energy agreed to pay a total of £1.483 million to affected customers. This sum included £231,000 in direct refunds for credit left on closed accounts and an additional £1.25 million in compensation. The average payment per affected customer was £43. Where customers could not be traced, Octopus made payments to the Energy Industry Voluntary Redress Fund, which supports vulnerable energy consumers.
The company also voluntarily wrote off the debt of customers who left during the period of non-compliance. Octopus has since updated its billing systems to ensure final bills are now sent within the required timeframe, in line with Ofgem’s regulations.
Why Final Bills Matter for Prepayment Customers
Prepayment meter customers pay for their energy in advance, topping up their meters as needed. While these customers can see their balance directly on the meter, a final bill is still essential. It provides a clear record of the final debit or credit position, allowing customers to reclaim any unused credit. Ofgem emphasised that issuing final bills is particularly important for those in financial difficulty, as it ensures transparency and gives customers a fair chance to recover what they are owed.
The Challenges of Compensating Prepayment Customers
Octopus Energy has argued that, while the principle of issuing final bills is sound, practical challenges make it difficult to implement. Many prepayment customers do not notify their supplier when they move out, and often use up any remaining credit or leave it for the next occupant. Industry systems for tracking prepayment balances can be slow and unreliable. In addition, Octopus only holds bank details for a small proportion of prepayment customers, and most refund cheques go uncashed due to a lack of forwarding addresses. Despite these hurdles, Ofgem maintained that suppliers must make every effort to return money owed to customers and to comply with the rules.
Ofgem’s Broader Compensation Rules
The Octopus case is part of a wider regulatory push to improve standards across the energy sector. Ofgem’s Guaranteed Standards of Performance (GSOP) require suppliers to pay compensation if they fail to meet minimum service standards. These include issuing final bills within six weeks, refunding credit balances within ten days, and switching customers to new suppliers within five days. From January 2025, the standard compensation payment for such failures increased from £30 to £40, reflecting the regulator’s drive to strengthen consumer protection.
Customers can also claim compensation for missed appointments, delays in switching suppliers, and unplanned power outages. For example, if a supplier misses an appointment, they must pay £30, and if your energy supply is switched by mistake, you are entitled to £40. These payments are usually made automatically, but customers should check their accounts and contact their supplier if they believe they are owed compensation.
Compensation for Involuntary Prepayment Meter Installations
Ofgem has also investigated suppliers who installed prepayment meters without proper consent, particularly during debt recovery. In 2025, energy suppliers agreed to pay £18.6 million in compensation and debt write-off to at least 40,000 customers who had prepayment meters installed without permission. Compensation levels in these cases can range from £40 to £1,000, depending on the severity of the breach and the impact on the customer.
Octopus Energy’s Response and Industry Impact
Octopus Energy has complied with Ofgem’s ruling and changed its billing practices to ensure future compliance. The company maintains that its prepayment practices have saved vulnerable customers millions, and it continues to call for more flexible, principles-based regulation that prioritises bringing bills down for all consumers. However, the case highlights the tension between regulatory compliance and the practical challenges of serving a diverse customer base.
For the wider industry, the Octopus case serves as a warning. Ofgem has made it clear that it will hold suppliers accountable for service failures, especially where vulnerable customers are affected. The regulator is also consulting on further measures to improve customer service, manage rising energy debt, and ensure fair treatment for all consumers.
What Should Customers Do If They Think They Are Owed Compensation?
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. Octopus has contacted affected customers directly, but if you believe you are owed money and have not heard from the company, you should get in touch with their customer service team. Keep records of your account details and any correspondence, as this will help resolve your claim more quickly.
Conclusion
Octopus Energy’s recent compensation payout, driven by Ofgem’s investigation, underscores the importance of regulatory oversight in the UK energy sector. While the company has taken steps to address the issue and improve its processes, the episode highlights ongoing challenges in serving prepayment customers and ensuring all consumers receive fair treatment. As the industry evolves, both suppliers and regulators must continue working to put customers first, ensuring that everyone can access the support and redress they deserve.
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