Thousands of British Gas customers who had prepayment meters force-fitted in their homes will between them receive compensation and energy bill debt write-offs worth up to £112m in the biggest energy supplier settlement on record.

Great Britain’s energy regulator found that British Gas forced PPMs on homes that were not keeping up with their bills at the height of the Russian gas crisis, in one of the most complex investigations in Ofgem’s history.

More than three years after the scandal emerged, the watchdog has called for a redress package worth more than four times the previous largest settlement, which in late 2015 required npower to pay £26m for its customer service failings.

British Gas must pay a £20m penalty into Ofgem’s voluntary redress fund to compensate customers who suffered unfair treatment and write off debt worth up to £70m.

The supplier must also continue to provide the remainder of a £22.4m voluntary assistance package it launched in the wake of the scandal to support PPM customers.

Tim Jarvis, Ofgem’s chief executive, said: “It is clear that British Gas fell short in its treatment of an unacceptable number of vulnerable customers who had a PPM installed without consent, and it’s right that they’ve taken action to put things right. Because of our action customers will receive a substantial package of redress, compensation and debt write-off.”

Ofgem temporarily banned the practice of forcing PPMs on households that missed repeated payments on their bills after the Times reported in early 2023 that debt agents working for British Gas had ignored signs of vulnerability to fit the meters.

The regulator later found that most of Great Britain’s major energy suppliers had forced PPMs into the homes of customers as the energy cost crisis in 2022 caused many to miss payments on their bills.

Its British Gas investigation concluded about one year after a separate investigation found that ScottishPower, EDF, E.ON, Octopus Energy, Utility Warehouse, Good Energy, TruEnergy and Ecotricity had fallen short of the regulator’s standards when fitting the meters to reclaim unpaid energy debts.

The suppliers collectively agreed last May to pay 40,000 households more than £18.6m in compensation and debt write-offs on their energy bills.

“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,” Jarvis said.

“This investigation forms part of Ofgem’s wider work to raise standards across the energy market and strengthen consumer protections. We continue to challenge suppliers to do more to identify and support customers in difficulty and proactively offer support, and our priority remains driving lasting improvements so customers can have confidence they will be treated fairly.”

The regulator’s investigation focused on a sample of British Gas customers to identify the proportion who may have faced unfair treatment, meaning the full scale of the scandal is not known. British Gas will have a year to determine the exact number of households who are due compensation.

Martin McCluskey, the minister for energy consumers, said: “Consumers deserve an energy market they can trust. That trust was broken for too many families affected by the forced installations of prepayment meters, which was an unacceptable national scandal.”

McCluskey said the government’s energy market reforms, including plans to strengthen the energy regulator, would “help make sure injustices like these never happen again”.

Chris O’Shea, the chief executive of Centrica, which owns British Gas, said: “What happened should never have happened, and I am sorry to the prepayment customers who were affected.

“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 regulator allowed suppliers to restart forced meter installations less than a year after its moratorium, although forced fittings in homes with young children or residents over the age of 75 remain banned.