Shell has been fined more than £500,000 since the energy price cap was introduced in 2019 because thousands of customers overcharged on prepayment meters.
The oil giant’s home energy supplier was unable to make tariff changes to the meters due to “operational errors”.
Ofgem said: “Excessive pricing by suppliers can create additional and unnecessary stress and worry at what is already a very challenging time for consumers.”
The regulator will announce changes to the energy price cap on Friday.
The energy price cap is the maximum that suppliers can charge household customers in England, Scotland and Wales for each unit of energy.
The new cap, which comes into effect on October 1, is expected to bring a household’s typical energy bill to around £3,600.
It comes as millions across the country face the fastest rise in the cost of living in four decades. Meanwhile, Shell recently reported record profits of $11.5bn (£9bn) between April and June alone.
Ofgem found that over a period of more than three years since the price cap was introduced in January 2019, Shell overcharged more than 11,000 households, causing them to pay over the price cap.
The mistakes were made when tariff updates were sent to people’s prepayment meters to change tariffs in response to changes in price cap levels, but Shell said not all meters were successfully changed due to a “variety of operational issues”.
Affected customers will automatically receive a refund totaling £106,000 and Shell will also pay £400,000 to Ofgem’s voluntary consumer protection fund.
Customers will also receive payments totaling £30,970 in goodwill from the oil giant, which identified the faults and alerted Ofgem.
Of 22 million households paying the price cap, around 4.5 million are prepaid meter customers, who are among the poorest and most vulnerable households in the country.
The charity Citizens Advice has warned that these energy customers tend to have the lowest incomes.
Neil Lawrence, Director of Retail at Ofgem said: “Ofgem expects suppliers to adhere to the terms of the contract they have with customers and in particular to ensure they do not pay more than the price cap level.”
A Shell Energy spokesman said: “We sincerely regret that errors in updating our prepaid meter sets have resulted in some customers being overcharged for a period of time.
“Once we identified the problem, we took steps to fix it and reported it to Ofgem ourselves.
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