The energy regulator has opened an investigation into a scheme to install solar panels on roofs in Stoke-on-Trent, which users say misled them into 25-year contracts.
Ofgem said it would investigate how Community Energy Scheme (CES) UK treated its customers.
Officials will look at CES’s sales practices and solar panel installations for residents in council housing.
Residents have been complaining for years that they felt tricked into signing quarter-century deals with the scheme.
The scheme promised residents that they could get cheap electricity if they allowed solar panels to be installed on their roofs.
It was run between Stoke Council and energy supplier Solarplicity until the supplier went bust in 2019.
But according to an online petition with 100 signatures, many residents had complaints about the transparency of the scheme.
Those who signed the petition said that they had either not been told that they were entering into a 25-year contract, or that they believed the surveyors were sent by the council.
The company insists that the 25-year term was stated on its website, literature and messaging from its sales team and that tenants who move out are no longer liable for the contract.
The Energy Ombudsman received more than 580 complaints about Solarplicity in July 2019 alone, the month before it ceased to trade.
It said that Solarplicity had often not remedied problems when the Ombudsman pointed them out, and did not refund its customers.
One user last year told Stoke-on-Trent Live that he felt he was being “bled dry” by the scheme.
Donald Frost, at the time 87, paid more than £750 to the scheme in just a year for the energy his home was using, in addition to £421 to EDF, his other supplier.
“I feel terrible. I’ve been to the ombudsman and they can’t help me. This is bleeding me dry. I worry every time I get a bill,” he told the paper.
On Friday Ofgem said: “Ofgem has launched an investigation into Community Energy Scheme UK’s sales and customer service practices.
“Ofgem’s investigation is in relation to sales practices and solar panel installations for social housing tenants in Stoke-on-Trent.
“The investigation will examine whether the company breached consumer protection rules.”
A spokesman for CES said: “We are committed to continuous improvement and we have always voluntarily provided Ofgem with information.
“We, along with the city council, will continue to work with and assist Ofgem during this investigation.
“As a company, we devote considerable time and resource to ensuring compliance with all laws and regulations, which includes the review of our literature and contracts by multiple lawyers, along with robust audit and quality assurance checks throughout the customer experience.
“We are proud to provide a clean energy service that ensures customers always receive the lowest market price for their energy use and we are committed to working with all of those involved to make sure that the process is as clear and helpful as possible.”