A major energy supplier had been ordered to pay £5 million in compensation to half a million customers for “unacceptable” service.

E.On Next will pay compensation to 500,000 customers after an Ofgem review of customer service standards and complaints-handling found “severe weaknesses”.

The review found customers were facing long call waiting times and a high level of unanswered calls.

Customers were forced to wait on hold for 18 minutes on average, while half of all calls were dropped and failed to contact the supplier, according to Ofgem.

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The regulator said E.On Next will pay £4 million to more than 500,000 customers that were potentially affected, working out at £8 each.

It will also pay a further £1 million to Ofgem’s voluntary redress fund, which supports vulnerable energy consumers and other innovation and carbon emission reducing investments.

Cathryn Scott, director for enforcement and emerging issues at Ofgem, said the penalty for E.On Next “shows Ofgem’s determination to stand up for the rights of consumers and drive up standards”.

She said: “The very least that a customer should expect of their supplier is for them to pick up the phone to them in a timely way.

“The levels of service that we discovered at E.On Next during the period of review were unacceptable.

“As the energy regulator, our purpose is to protect energy consumers and this action serves as a reminder to all suppliers that they must ensure that their customers are able to contact them quickly and easily when they need to.

“This is particularly important during this time of volatile energy prices when many households are struggling with their bills.”

An E.On spokesman said the firm had already begun improving its services before the Ofgem review.

He said: “We won’t shy away from the fact that we weren’t at our best, but we’re heartened Ofgem recognises our efforts and our success in improving service levels even before this review began.

“We hit our agreed targets with Ofgem on day one and we’ve stayed there ever since.”

Ofgem said its review of the sector required all suppliers to make customer service improvements after it found moderate weaknesses at 11 companies, including British Gas, EDF and Scottish Power.

Minor weakness were found at five suppliers – Bulb, Ecotricity, Green Energy, Shell and Octopus – and it said not one supplier was found to have no weaknesses at all.

In some instances, customers were left waiting for hours on the phone, while they also faced poor complaints handling with a high level of complaints upheld by the energy ombudsman.