British Gas overcharges customers by millions

British Gas has been accused of pocketing millions by overcharging its customers. But is this error not a distraction from bigger issues?

The papers are full of reports this week about how British Gas failed to follow regulatory guidelines when calculating its customers' energy bills.

From 2006 to 2011, it did not appropriately round down its calculations of the “calorific value” of the gas you use. This is part of the equation to calculate the energy a household has consumed, so it affects your bills.

As a result, British Gas could have overcharged customers millions of pounds over the six years.

British Gas claims that it did nothing wrong, but regulator Ofgem disagrees. A spokesperson from Ofgem was quoted as saying: “British Gas' interpretation of the regulations meant that although customers didn't pay for energy they did not receive, they paid more than regulations allow.”

Did customers pay more?

British Gas argues that, if the calorific value had been rounded correctly, it would have just raised prices to make up for it, so it makes no difference. We'll never know if that's true (but I think it might have led to a slightly inaccurate online price comparison in some cases).

How much more did individual British Gas customers pay? Ofgem has called the impact on customers “unclear”, so I've done my own rough calculations. Using data from comparison sites, I estimate that it would have cost customers no more than £2 extra per year, or up to £12 per customer over the six years.

We shouldn't make a mountain out of such a molehill, but we also can't just ignore breaches of the regulations that lead to individual customers paying a little more – because each breach will add up.

Over the six years, British Gas could have taken tens of millions from its customers as a result of its breach of the regulations.

Cynical move or heartfelt help?

British Gas has promised to pay £10 million (despite not accepting it did anything wrong) to an energy charity that helps customers who are struggling to pay their energy bills.

I think this might be another molehill, not a mountain.

Companies that receive lots of bad press, industries that attract more than their fair share of complaints, and sectors that get larger profits the more ecological and environmental damage they do, tend to try to soothe customers, regulators and politicians with charitable contributions. That's why the £10 million might well have already been earmarked for “good works”.

The charity in question also happens to be the British Gas Energy Trust, so British Gas and its owner Centrica could even get some good publicity in the long run out of stating how many millions it has paid to its own charity to help the vulnerable people.

Energy companies are required to treat vulnerable customers with compassion; by putting all that side of the business into a charity, British Gas can hope to get some good press eventually.

And those of you who are switched on today might well point out that it is customers and shareholders who ultimately pay the price of any donations from British Gas to its charity. There are far worse causes than those people who can't even pay their energy bills but, in effect, you've paid for the breach of regulations twice.

Remember, if you want to switch your gas and electricity, you can compare the tariffs available in your area with Lovemoney's quote engine.

More on gas and electricity:

Energy tariffs to avoid!

Energy firms to be forced to publish wholesale prices

Spark Energy referred to Ofgem after surge in complaints

Why paying your energy bills by direct debit may not prevent bill shock