The review into the supplier raised concerns about the provision of additional support credits for prepayment meters customers. It is thought some 25,000 customers were potentially affected by the issue.
This includes some who have medical conditions and those classed as vulnerable.
Customers who are potentially affected are likely to receive £20 each in most cases as a direct credit on their meter.
An additional £321,740 is set to be paid into the Energy Redress Fund by the firm.
This fund supports energy customers who are in vulnerable situations, as well as targeting carbon emission reducing investments and other innovation.
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The assessment from Ofgem was based on numerous factors when evaluating Utilita.
This included scripts of employees speaking to customers, training materials, procedures, policies and recorded customer calls.
Cathryn Scott, Ofgem’s director for enforcement and emerging issues, said: “As the energy regulator, protecting consumers is our top priority, and we have strong expectations that energy suppliers must take the individual circumstances of consumers, particularly those who in vulnerable situations, into consideration.
“Prepayment meters are currently relied on by around four million UK households, and the current cost of living issue is placing pressure on many households, which in turn is causing more people to require additional support credits to top-up for their prepayment meters.
“While Utilita has moved swiftly to correct these issues and agreed to compensate those affected, this action should serve as a reminder to other suppliers to go further to ensure vulnerable groups are getting the support they need, particularly during the colder winter months.”
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The provider was issued with a provisional order relating to this issue on September 9 – which lapsed on December 9.
This is because Ofgem believes Utilita has taken steps which are “appropriate to secure compliance”.
In recognition of its failings, Utilita has agreed to the financial redress package rather than a penalty, which means customers who have been affected should secure their payment faster, and directly.
However, Utilita hit back at Ofgem’s announcement saying they were “shocked and disappointed” at the tone of the statement.
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A statement read: “To say we have been ‘failing to act on smart meters’ is grossly unfair – we have led the way, installing the first smart meter in Britain in 2005, many years before the national rollout began.
“As Ofgem is well aware, our concerns over SMETS2 meters are around the robustness and reliability of the systems for PAYG customers and reduced functionality.
“We have made several suggestions, based on our considerable knowledge of operating smart PAYG since 2005. But we have not been listened to.
“We have always sought to act in the best interest of customers and have delivered a market-leading service for the last decade. And we will continue to do so.”
Utilita stated more than 90 percent of its customers are smart meter installed – which it asserts is roughly double the industry average.
The statement added: “Our customers are the most smart-engaged in Britain.
“Let’s be clear: our decision to continue to install first generation meters is a moral one made solely with the best interests of our customers at heart.
“Last month alone, more than 50,000 customers gave themselves an account credit when they needed help during the pandemic, via our tried and tested meter functionality that meets our customers’ needs very well.”
Prepayment customers who are part of the Government’s Energy Bill support scheme should receive smart meter credit or payment vouchers to provide them with top-ups, Ofgem added.
Those who are yet to receive this are urged to contact their supplier straight away.