Ofgem said suppliers including the Big Six firms such as British Gas, npower and EDF overcharged customers £7.2 million over seven years after failing to follow price protection rules.
The rules are designed to safeguard a customer’s tariff price when they decide to either switch suppliers or deals after a price increase.
It said several suppliers self-reported the issue to the regulator, which then prompted it to ask all firms to assess their practices, revealing failures among 18 suppliers between 2013 and 2020.
The firms have agreed to refund all those affected and, in some cases, make additional good will payments to the tune of £10.4 million in total, Ofgem said.
Anna Rossington, interim director of retail at Ofgem, said: “Customers should have confidence in switching and not be overcharged when doing so.
“This case sends a strong message to all suppliers that Ofgem will intervene where customers are overcharged and ensure that no supplier benefits from non-compliance.”
Customers affected include those on standard variable and fixed term deals who switched to different suppliers, as well as those on fixed term deals who switched to another deal with the same supplier.
The regulator said most of the failures were due to suppliers not having proper plans in place to make sure the protections were applied in full when customers decided to switch.
Ofgem said it was not taking formal action against the suppliers, given their co-operation and agreement to compensate.
But it warned firms could face formal action if they do not follow the price protection switching rules going forward.
Ovo Energy is among those paying the biggest compensation bills, with £2.8 million due in redress, followed by Scottish Power with a £2 million bill, while British Gas is paying out £1.3 million and Shell is forking out £1.2 million.