The energy supplier Ovo has agreed to pay £2.37m in compensation to customers and towards a redress scheme over failures in how it handled customer complaints.

The sector regulator for Great Britain, Ofgem, said 1,395 Ovo customers would receive compensation after lengthy delays in getting their complaints addressed, in some cases up to 18 months. There were also delays in Ovo taking action over the Energy Ombudsman’s decision when complaints were progressed.

Ovo will pay £378,512 in compensation to affected customers and has given an extra £2m to the energy industry voluntary redress scheme “in recognition of the severity of consumer detriment caused”, Ofgem said. Affected customers will be contacted directly by Ovo and do not need to take any action.

The energy redress fund provides money to charities to provide energy-related projects that support consumers in vulnerable situations.

Jacqui Gehrmann, the deputy director of retail compliance at Ofgem, said: “Energy is an essential service. When things go wrong, it can cause consumers a lot of distress. In this case Ovo failed to adequately protect and respond to their customers when it was needed most. This is not acceptable.

“Consumers deserve a clear and timely response when they make a complaint, and that’s why we stepped in quickly when we identified that Ovo’s performance was falling below acceptable standards.”

Ovo is the UK’s fourth-largest energy supplier, with 4 million customers across England, Wales and Scotland. Ofgem said the company had increased its complaint handling resources and had improved its complaints management system and its case management processes to make sure senior staff had oversight.

An Ovo spokesperson said: “At Ovo we want to make sure we give our customers the best experience we can at every turn. We’re now third in the Citizen Advice energy supplier rankings for service.

“However, we recognise that a particular group of our customers in 2023 waited longer than we’d like for a resolution and were overdue a response from us, so we’ve sent them a letter of apology and compensation to help.”

In March, the writer and broadcaster Victoria Coren Mitchell became the most high-profile Ovo customer to be on the receiving end of incorrect bills, threatening it with possible legal action in a post on X. Her case prompted the consumer group Which? to call for “the worst performers” in the energy sector, which it said included Ovo, to take urgent action to improve their customer service.

In November 2022, the Guardian reported that some Ovo customers were left shocked when they received bills of up to £49,000 because of data errors that led to overinflated energy projections. Reports of billing problems at the company have continued: the Guardian reported on a case in February this year.