British Gas has agreed to pay £20m into a redress fund and compensate customers to settle an investigation by the energy regulator into the forced fitting of prepayment meters.
Ofgem found the company had "failed to meet the standards required" when installing the meters and had breached licence conditions specifically aimed at protecting customers in vulnerable situations.
Three years ago it emerged that debt agents working for British Gas had broken into the homes of vulnerable customers to fit prepayment meters.
British Gas has apologised, and the complete settlement package will cost the company up to £112m in payments, compensation and writing off customers' debt.
In 2023, the Times revealed how agents working for Arvato Financial Solutions, on behalf of British Gas, had forced their way into the home of a single father of three to install a prepayment meter.
After establishing the property was unoccupied, an undercover reporter observed the agents work with a locksmith to force their way in and install a meter.
The scandal was industry-wide: 40,000 customers had a prepayment meter installed without permission between 2022 and 2023.
Suppliers including EDF, E.On and Scottish Power have already agreed to pay compensation.
Ofgem investigated and subsequently banned the practice of fitting prepayment meters without customers' permission in high-risk households.
The regulator found that British Gas was first made aware of the issue in 2018 through an external review. The problem was again flagged in an internal audit in 2021 but the company did not suspend the practice until 2023.
Ofgem boss Tim Jarvis said the company "fell short in its treatment of an unacceptable number of vulnerable customers who had a PPM [prepayment meter] installed without consent".
"The installation of prepayment meters under warrant should only be a last resort, with rigorous checks to ensure debt is recovered lawfully, proportionately and safely," he added.
He told the BBC's Today programme that suppliers have to go to court to get a warrant to install a meter without consent.
"Once they've got a warrant they then have to follow our rules. Our rules include a welfare check," he said.
Ofgem said that customers who are due compensation would be contacted and do not need to take any action. The watchdog did not say how many people would be eligible for a payout.
The boss of British Gas owner Centrica, Chris O'Shea apologised to those customers affected, saying: "What happened should never have happened."
He added that when the problems emerged the company "stopped the activity immediately and took rapid action to improve our processes and change how we engage with customers in debt, particularly those in vulnerable situations".
"Over the last three years, we have treated this matter with the seriousness it deserves and have made changes to our practices and put safeguards in place to ensure we deliver the standards our customers have every right to expect."
The full settlement package includes:
Simon Francis, coordinator of the End Fuel Poverty Coalition, said the results of the Ofgem investigation were "truly shocking".
"They have confirmed that British Gas knew about these failings as far back as 2018, was warned again in 2021, and still did not take adequate action." he said.
"The forthcoming Energy Independence Bill must include provisions to end the forced installation of pre-payment meters and fundamentally reform the warrant process. This scandal must never happen again."
Clare Moriarty, the head of Citizens Advice, said: "Many of those affected were left without heat in the depths of winter because they couldn't afford to top up. Those people deserve real compensation.
The settlement, she said, "helps deliver that and serves as a warning to energy suppliers not to put consumers at risk".
"Without proper support, struggling families can be left in really dangerous situations. Ofgem must ensure the closure of this investigation is a step forward, not the final word."
There are three types of prepayment meters - key meters, smart card meters and smart prepayment meters. The first two work in a very similar way.
Prepayment meters require customers to pay for their energy use in advance, either through accounts or by adding credit to a card in a convenience store or Post Office.
Strict rules also apply that prevent energy suppliers moving an at-risk customer onto a prepayment meter if they are struggling to pay.
Many rented properties also have prepayment meters.
Problems can arise when residents no longer have any credit left on the meter and have no money to top it up, leaving them unable to cook or heat their homes.
