Image caption British Gas reported the problem to Ofgem in April last year

The UK's biggest energy supplier, British Gas, mis-sold energy deals by making exaggerated claims to potential customers, the regulator has said.

Ofgem said British Gas sales staff did not make accurate comparisons between suppliers' deals, and so made overblown claims about savings for switching.

The cases involved British Gas staff working in Sainsbury's stores nationwide between 2011 and 2013.

An average of £130 compensation has been paid to 4,300 affected customers.

The company has been unable to contact another 1,300 affected customers, so their compensation will also go into a fund to help vulnerable customers.

'Poor behaviour'

The total compensation bill is £566,000, with a further £434,000 being paid into the same fund as part of the penalty.

The payout is modest in comparison to some mis-selling penalties handed down to some energy companies in recent years.

In May, E.On agreed to a record £12m penalty for phone and doorstep mis-selling, in addition of compensation payments of between £3m and £8m. A number of other energy suppliers also faced bills for this type of mis-selling.

"Ofgem expects all suppliers to put this poor behaviour behind them and really start acting in a way that will help consumers trust energy suppliers. Where they don't, Ofgem will act," said Sarah Harrison, of Ofgem.

'Swift action'

In the British Gas case, staff failed to make it clear to potential customers that Sainsbury's Energy was actually being supplied by British Gas.

They also compared monthly direct debit bills to those for people who made quarterly payments. As a result this exaggerated the potential savings available.

Other potential customers were approached by sales staff at the Westfield Shopping Centre, at Shepherd's Bush in west London.

British Gas said that it had discovered the issue through its own internal checks, then took "swift and decisive action" to contact and compensate customers, before contacting Ofgem.

"We are very sorry and have ensured no customer will be out of pocket as a result," said Ian Peters, managing director of British Gas Residential.

A spokeswoman for Sainsbury's said: "As you would expect, we have taken this very seriously and ensured British Gas compensated customers."