ENERGY giant British Gas has been fined £2.5m by the energy watchdog for failing to deal with complaints correctly.

British Gas, which serves nearly half of the UK’s households, failed to re-open cases when customers indicated their complaint had not been resolved, Ofgem found.

The regulator also said the company failed to provide key information about the energy ombudsman to customers when complaints were not resolved and put in place a process to deal with businesses with 10 employees or fewer.

Ofgem said British Gas breached regulations setting standards for complaint handling which came into effect in October, 2008.

And Ofgem warned other energy companies that it was prepared to take similar strong action against other energy suppliers if necessary.

Ofgem senior partner Sarah Harrison said the findings highlighted “basic failures” in British Gas’ customer service – particularly in dealing with some of its small business customers – and showed Ofgem’s commitment to use its powers to ensure suppliers treat customers fairly and transparently.

“We warned the industry in March that we would be backing up our plans to reform the retail market with a tough approach to enforcement,” she added.

British Gas said Ofgem’s ruling was “totally disproportionate” but did admit it failed on the issue of dealing with so-called micro businesses.

A British Gas spokesman said: “Specifically for our micro-business customers, we acknowledge our service fell short of what they should expect from British Gas, for which we apologise.

“We knew we had an issue here which is why we flagged it to Ofgem. After a £4m investment, we are now confident we meet all of our regulatory requirements.”

Ofgem has vowed to get tough with energy firms as part of a proposed shake-up of the industry.

The regulator’s reforms include reducing the number of tariffs suppliers offer to avoid confusion over price and improving transparency by appointing an independent accounting firm to ensure the suppliers’ books are clear.

Ofgem is investigating Npower and EDF Energy for complaint handling, while Scottish Power, Scottish and Southern Energy, EDF Energy and Npower are being investigated for mis-selling. The watchdog is also investigating Scottish Power over two of its tariffs and for potentially misleading marketing.